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Against
Global Apartheid
South Africa meets
the World Bank, IMF and International Finance
Patrick Bond
UCT
PRESS
This book is copyright under the Berne Convention. In terms of the Copyright Act 98 of 1978,
no part of this book may be reproduced or transmitted in any form or by any means (including
photocopying, recording, or by any information storage and retrieval system) without permission
in writing from the publisher.
Acknowledgements
Cover photograph of Jubilee protest courtesy of Business Day.
All other ptotographs courtesy of Ben Cashdan
Distributed in the USA exclusively by Palgrave, a division of St. Martin’s Press LLC, 175 Fifth
Avenue New York, NY 10010
www.zedbooks.demon.co.uk
Prelims /007 7/22/03 11:40 am Page iii
Contents
Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vi
Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xvi
Acronyms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xxiii
Part three: Economic power and the case of HIV/AIDS treatment . 153
Chapter eight: Pharmaceutical corporations and US imperialism . . 154
1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154
2. US government pressure points . . . . . . . . . . . . . . . . . . . . . . . . 157
3. Drug companies pressure the US government . . . . . . . . . . . . . 166
4. Resistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170
C ONTENTS v
Chapter eleven: The Third World in the movement for global justice 215
1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 215
2. The world against Washington . . . . . . . . . . . . . . . . . . . . . . . . . 216
3. Lessons of Zapatismo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 220
4. Does Africa need Washington? . . . . . . . . . . . . . . . . . . . . . . . . 225
5. South-South-North alliances against
global finance/commerce . . . . . . . . . . . . . . . . . . . . . . . . . . . . 231
Afterword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 293
Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 314
Preface /007 7/22/03 11:39 am Page vi
Preface
P REFACE vii
financial integration. (And in any case, the discursive victory was merely a
symbolic – not decisive – incident.) Beginning in mid-1990, ‘reconnaissance
missions’ from the Washington-based financial institutions were already
undermining the integrity of domestic policy formulation, and ambitiously
promoting the interests of international financial and corporate capital.
This book tells that broader story, tracing it forward into the post-apart-
heid era. Indeed, by early 2001, George Soros confirmed during an inter-
view with film-maker Ben Cashdan at the Davos World Economic Forum
that, ‘Today South Africa is very much in the hands of international
capital.’4
But from illegitimate domination, resistance inevitably emerges. A few
minutes prior to Soros’ confession, on an international satellite transmission
that linked Davos to Porto Alegre’s World Social Forum, Soweto political
activist Trevor Ngwane had, face to face, accused the financier of indirectly
putting a massive squeeze on Pretoria’s budget. In turn, fiscal austerity was
the most proximate national cause of water cut-offs, a failure to install pipes
to households without access, and a resulting cholera outbreak that, within
ten months, infected more than 100 000 people, killing more than 200.
I come from South Africa. We still had a hope that liberation would bring
houses, jobs and good education for our people. But since our government
got closer to the World Bank and people like George Soros, we have lost a
million jobs. As I am talking we had an outbreak of cholera because the
government was forced by the likes of Soros to introduce privatisation of
basic services like water and electricity.
Ngwane ‘actually has a point, because South Africa has to meet the
requirements of international capital’, acknowledged Soros.
I think South Africa is following pretty sound macroeconomic policies, but
is not able to generate sufficient growth to satisfy the legitimate aspirations
of the people. And there is something wrong with this … Because actually,
the global market, as it functions, is really an uneven playing field. The
centre is much better situated than the periphery countries. And it is better
situated not just because it is wealthy, but also because it controls the system.
Ngwane, Soros and the politicians who sit uncomfortably in between will
make further appearances in this book, as I document global uneven devel-
opment, inequality, financial crisis and some of their implications for
ordinary South Africans.
Soros, to his credit, has always spoken frankly of the threat that inter-
national capitalism poses to society. On occasion, Thabo Mbeki and his
colleagues have said much the same. But repeatedly, the outcome has
always appeared to any attentive observer as a case of ‘talking left, acting
right’.
Preface /007 7/22/03 11:39 am Page viii
The larger point of all this will become clearer in Parts 1–3 of this book.
Put briefly, it is, simply, that the democratic transition in South Africa to an
important degree hinged not only on pressures for political liberation. Just
as crucial was acknowledgment by ANC deal-makers that the trade-off for
the big business community’s belated rejection of apartheid was economic
liberalisation – i.e. release of local capital from apartheid’s laager, whether
through dramatically lower corporate taxes (down from 48% in 1994 to
30% by 1999), lower tariffs on imports, or the lifting of controls that had
prevented capital flight.
Crudely put, big business basically said, ‘You chaps can have the state, but
let us get our money out of here!’ Not only did the financial looting of South
Africa follow apace, but also the country’s economic, social, cultural and
policy environment was – and continues to be – enormously influenced by
global economic processes and institutions.
Yet what is termed ‘globalisation’ brazenly contradicts society’s strong
motivation for more equitable development to redress the massive residual
disparities of apartheid. The detrimental influence of international
economic integration is most strongly felt through new financial, trade and
investment vulnerabilities, but also in social policy that follows inter-
national norms, and to a certain extent in political-cultural subordination to
the global markets. As President Mbeki himself put it in mid-2000, ‘The
globalization of the economy resulting among other things in rapid move-
ments of huge volumes of capital across the globe, objectively also has the
effect of limiting the possibility of states to take unilateral decisions.’5
The narrowing of national sovereignty is most evident when a country
falls foul of the likes of George Soros. So let us take a quick look at what
exactly happens.
P REFACE ix
served as South Africa’s main barrier to damaging global financial flows for
nearly a decade. In August 1985, foreign banks fled immediately after
PW Botha’s finger-wagging ‘Rubicon’ speech, so the finrand substantially
slowed subsequent capital flight by serving as a tax on outflows.6 As a result
of its 1995 demise, sufficient ‘hot money’ flowed into South African shares
that year to fund half the trades on the Johannesburg Stock Exchange.7
But in early 1996, the hot money flooded back out, leading to a currency
crash of more than a quarter of the rand’s value over several months, set off
by a ‘sell’ report emanating from Zurich bankers that was induced by a false
rumour that Mandela was ill. The Reserve Bank quickly lost R5 billion of its
hard-currency reserves, representing a drop in import coverage from two
months’ worth to less than one month’s by mid-1996. The value of the rand
slid from R3.60 to the US$ in January 1996 to R4.40/$ in March, to R4.70/$
in December. In order to stem the outflow and stabilise the rand, interest
rates were hiked dramatically over a few weeks. In ‘real’ (after-inflation)
terms, the prime interest rate paid by leading firms rose from 12% to nearly
15% in May 1996, a level only once surpassed in modern South African
history (in mid-1998).
The adoption of the homegrown structural adjustment programme
Growth, Employment and Redistribution (Gear) followed soon after, as a
direct response to international investor demands. ‘Just call me a
Thatcherite’, whimpered Mbeki at the Gear press conference on 14 June,
begging the markets to stabilise. But self-humiliation was not enough, as the
currency slide continued for several more months.
No matter the painful and surprising experience of 1996, South Africa’s
macroeconomic managers failed to learn from their experience. The second
post-apartheid rand crash occurred over a few weeks beginning in April
1998. Global investors fled the ‘emerging markets’ following the East Asian
and Russian collapses, and South Africa again faced financial crisis. Most
spectacularly, Stals wasted more than R30 billion in hard currency reserves
one weekend in June when he unsuccessfully tried to defend the rand from
attack by local and foreign sellers.
The rand’s fall continued, from R5.10/$ in May to R6.70/$ at its low
point in July, before it stabilised at R6.20/$ in subsequent months. More so
than in 1996, this badly affected the JSE, whose all-share index dropped
nearly 40% from its April 1998 peak of 8 200, to a low of less than 5 000 in
August. In addition, net bond purchases switched from an inflow of nearly
R10 billion in the first quarter of 1998 to an outflow of nearly R16 billion
in the third quarter. This was the key factor in the drop in Reserve Bank
foreign reserves from an import cover of more than three months to just
over two months from April to September 1998. To attract funds back to
South Africa, Stals raised the Reserve Bank’s main lending rate from 14.8%
in April to 21.8% in August.
Preface /007 7/22/03 11:39 am Page x
P REFACE xi
companies with active South African operations. At the same time, a few
miles up the I-95 highway in Philadelphia, an inner-city preacher, Rev. Leon
Sullivan, was conducting an entirely different crusade: to help multinational
corporations continue operating within South Africa, but under a half-
hearted code of conduct committing them to conduct their own operations
in a somewhat less explicitly racist manner. Tutu referred to Sullivan’s
gambit as ‘shining the chains of apartheid’, and confirmed that the demo-
cratic forces would fight on until apartheid’s chains were completely
broken.
Thabo Mbeki unabashedly terms the international political-economic
system ‘global apartheid’. The next logical question is: are Mbeki, Manuel,
Erwin and their colleagues aiming to ‘break’ the chains of 21st-century
global apartheid, or merely to provide a glossy, New South Africa ‘shine’?
P REFACE xiii
There are, to be sure, people of good conscience who dispute ‘nix-it’ strate-
gies and tactics. Some have made valiant efforts since the early 1980s to ‘fix’
Preface /007 7/22/03 11:39 am Page xiv
the IMF, World Bank, international financial markets and other manifesta-
tions of global apartheid. In fields like environmental regulation, gender
sensitivity, community participation, institutional transparency, corporate
accountability, and even the highlighting of poverty, the fixers can claim a
few victories.11
But simultaneously, broader social, environmental and economic con-
ditions worsened dramatically. Reformers can claim less and less legitimacy
for their efforts, which often appear as merely shifting deck-chairs on a
Titanic-like global economy. So it is to a different group we will have to
turn, especially in Chapters ten to twelve, for a vision of a better future, to
what I term ‘global justice movements’. In this group can be found organi-
sations and people who have little or no faith in the initiatives advanced by
the small bloc of Third World nationalists and ‘post-Washington
Consensus’ reformers, and who see the need for deeper surgery.
Over the past fifteen years, I have been extremely privileged to have had
contact with inspiring global justice advocates, activists and intellectuals.
Whatever I may have written in the pages below that makes some sense is
due almost entirely to their input.
Notes
1 African National Congress (1994), The Reconstruction and Development Programme,
Johannesburg, Umanyano Publications, sections 1.4.17 and 6.5.16.
2 For a recounting of other promises and how they fared, see Bond, P. and Khosa, M.
(1999), An RDP Policy Audit, Pretoria, Human Sciences Research Council; and
Bond, P. (2000), Elite Transition: From Apartheid to Neoliberalism in South Africa,
London, Pluto and Pietermaritzburg, University of Natal Press, Chapter 3:
‘Rumours, Dreams and Promises’.
3 Tellingly, a few weeks after the mid-1994 transition, after failing to get the top
Reserve Bank financial regulatory position he sought, Neil Morrison took a job with
a Johannesburg merchant bank to promote privatisation.
4 This and subsequent quotes come from Cashdan, B. (2001), Globalisation: Whose
Side are We On?, film, Johannesburg, recorded in January in Davos.
5 Mbeki, T. (2000), ‘Keynote Address to the ANC National General Council’, Port
Elizabeth, 12 July.
6 The premium paid by exporters of financial capital ranged from 10% to 50%,
depending on exchange rates and political circumstances. See Chapter twelve for
more on the finrand.
7 The finrand was dropped, inexplicably, in the immediate wake of a run on the
currencies of Mexico and other Latin American countries by investment specu-
lators. Suddenly, as a result, purchases of South African bonds by non-residents
doubled from the average annual levels of the past decade. The inflow also led to a
rise in the monthly average share turnover from R5 billion to R10 billion within
a year, and the stock-market all-share index rose from 5 000 in early 1995 to 7 000 a
year later (using 1960 as the 100 index).
8 Business Day, 25 April 2001.
9 The Economist, 22 February 1999.
10 Sunday Independent, 9 January 2000.
Preface /007 7/22/03 11:39 am Page xv
P REFACE xv
11 Personally, I was party to several such campaigns to reform the World Bank,
beginning in 1985 when I joined the national executive of the US Debt Crisis
Network. Finally, in 1998, I gave up on this approach. The straw that broke the
camel’s back was the World Bank Inspection Panel’s rejection of a formal, well-
documented request to investigate the Lesotho Highlands Water Project scheme, as
Chapter three describes, leaving Johannesburg township activists stunned at the
World Bank’s lack of accountability. The last gasp for reform was probably the effort
by World Bank chief economist Joseph Stiglitz to introduce a ‘Post-Washington
Consensus’ economic paradigm – but Stiglitz was fired in late 1999.
Acknowledge 7/22/03 6:26 pm Page xvi
Acknowledgements
A CKNOWLEDGEMENTS xvii
On the activist front, Dennis Brutus, George Dor, Trevor Ngwane and
John Saul remain my heroes and closest comrades, for their tireless commit-
ment to popular education and mobilisation. Archbishop Njongonkulu
Ndungane and Fatima Meer have served as politico-moral compasses, with
their mature but no less urgent intent to abolish global apartheid.
Back at the office, the director of the Wits Graduate School of Public
and Development Management, Guy Mhone, established the ideal condi-
tions for a footloose academic/activist, and all my colleagues have been
broad-minded about their errant hallmate. My co-directors of the
Municipal Services Project, David McDonald and Greg Ruiters, kept me
thinking and researching locally. I have been lucky to labour within a milieu
of enquiry at Wits where masters and doctoral students have taught me a
great deal.4 And I serve as a volunteer associate of two other institutions
which are remarkably effective on shoestring budgets: the Alternative
Information and Development Centre (Cape Town/Johannesburg) and
Center for Economic Justice (Washington).
An old Argus Company desk at which I wrote most of the words that
follow was a gift from my former neighbour Peter Wellman, who passed
away a few days after the first draft of this book went to the publishers.
Peter was a great iconoclast, an advocate of racial and social justice who
wrote and edited unusually clearly and prolifically, a journalist with enor-
mous commitment (though his employer never knew the risks he took for
the ANC underground), an internationalist and regionalist whose socialist
spine never bent, and a man who immediately understood the campaigning
against global apartheid over which I enthused. He left us all with fondest
memories, including tossing typewriters out of buildings in frustration!
And then there are abundant Johannesburg friends, including those in
the debate journal and e-mail listserve, and patrons of the Workers Library
and Museum, the Supper Club in Berea, Peg’s jazz bistro in Troyeville, the
Wits Post-Grad Pub, Cosatu House, the NGO ghetto of Braamfontein,
Rockey Street, township shebeens and other motley hangouts.5
My publisher Solani Ngobeni at Juta/UCT Press encouraged me and
forgave my quirky schedule, and I warmly thank his staff for hard work and
forbearance. Additional gratitude is due to several editors, journals and
publishing houses for permission to revise articles and chapters for
inclusion below.6 The Human Sciences Research Council funded an early
investigation along these lines in 1997, and the International Development
Research Centre and University of Natal Centre for Social and
Development Studies were also benefactors. My son Jan was magnanimous
with patience, rooting for me as best he could in the real world, and always
asking the hardest questions.
And the numerous global justice movements kept us all focused, just as
did the many institutions and people responsible for the continuation of
Acknowledge 7/22/03 6:26 pm Page xviii
global apartheid. Special thanks go to the World Bank and IMF for doing
more to unite social change activists across the globe than anything since
apartheid itself.
I have a feeling that all of those implicated above will be critical to our
future: mine, yours, South Africa’s and probably the world’s.
Patrick Bond
Johannesburg, May 2001
Notes
1 Going backwards to the point in mid-1998 when I began putting together these
arguments about resisting global apartheid for seminars, workshops and con-
ferences, many open-minded audiences heard portions of this book, and all
provided valuable feedback. In the first half of 2001, these included the Wits
University Graduate School of Public and Development Management’s seminar on
Advanced Topics in Political Economy and several other P&DM classes; the
Integrated Social Development Centre fora on development finance and water
privatisation in Accra; the Southern and Eastern African Trade Information and
Negotiations Initiative conference on Financing for Development in Geneva;
Oxford University’s School of Geography; the World Council of Churches’ consul-
tation on the Bretton Woods institutions, Geneva; the University of Natal/Durban
Centre for Social and Development Studies; and in Windhoek, the Labour Research
and Resources Initiative’s Southern African Conference on Foreign Direct
Investment.
During 2000, I attended the South African Graduates Development
Association conference on student-worker alliances in Johannesburg; Kairos
Europa’s Financial Markets Consultation, Frankfurt; the NGO parallel session to
the G-20 Finance Ministers Meeting in Montreal; Columbia University’s Institute
of African Studies academic seminar, New York; the University of Cape Town
Graduate School of Business Seminar on Globalisation; the Southern African
Regional Institute for Policy Studies Colloquium on Southern African Integration,
Harare; the Ottawa Public Interest Research Group chapter meeting at Carleton
University; the International Development Research Centre seminar on gover-
nance, Ottawa; the Brecht Forum, New York; Hofstra University’s Department of
Political Science, New York; the Rocky Mountain Peace and Justice Center,
Boulder, Colorado; a seminar held by the Center for Economic Justice and the
Center for Economic Policy Research, Washington; the University of Durban-
Westville’s inaugural Fanon Lecture; the African Network and Forum on Debt and
Development Project on Regional Applications of the Tobin Tax, Harare; the
Grahamstown Festival Wordfest; the Anglican Diocese conference on social and
economic change, Cape Town; the Africa Centre, London; the Bretton Woods
Reform Organisation, London; the United Nations University’s World Institute of
Development Economics Research, Helsinki; the Southern African Catholic
Bishops’ Conference Symposium on Strategies to Bridge the Gap Between Rich
and Poor in South Africa, Gauteng; the 50 Years is Enough Network seminar on
structural adjustment, Washington; the Departments of Sociology at Rhodes
University, East London campus and Rand Afrikaans University, Johannesburg; the
University of Port Elizabeth Department of Political Science; the SA National
Economic Policy Research Institute seminar on macroeconomic policy,
Acknowledge 7/22/03 6:26 pm Page xix
A CKNOWLEDGEMENTS xix
(Moscow); Mansoob Murshed (Helsinki); David Hall, Joe Hanlon, Alex Wilks,
Angela Wood and Ellen Meiksins Wood (London); Karen Bakker, Tony Lemon and
Eric Swyngedouw (Oxford); and Paul Cammack (Manchester).
In North America, I am indebted to George Caffentzis, Greg DeFreitas, Sylvia
Federici, Doug Henwood, Vicki Larson, John Mage, Mzwanele Mayekiso, Andrew
Nash, Rachel Neumann, Louis Proyect, Danny Schechter and Maliq Simone (New
York); Steve Askin, Soren Ambrose, Moya Atkinson, Tony Avirgan, Jaron Bourke,
Joanne Carter, Jim Cason, Fantu Cheru, Dana Clark, Carole Collins, Andrea
Durbin, Bob Lenhard, Jon Liss, Lisa McGowan, Robert Naiman, Njoki Njehu,
Graham Saul, Tom Schlesinger, Todd Tucker, Neil Watkins, Mark Weisbrot, Rob
Weissman (Washington); David Barsamian, Denis Bond, David Martin and Julika
Slaby (Colorado); Beverly Bell (Alburquerque); Robert Brenner, Eric Mann and
Leanne Mann-Hurst (Los Angeles); Erick Brownstein, Kevin Danaher and Lori
Pottinger (San Francisco); Greg Albo, Sam Ginden, Roger Kiel, Colin Leys, Leo
Panitch, John and Pat Saul and Alan Zeuge (Toronto); Karen Emily, Pam Foster,
Robin Round and Christina Zarowsky (Ottawa); and Michel Chossudofsky and
Jaggi Singh (Montreal). In Mexico, Gustavo Castro, a masked Zapatista and Global
Exchange were excellent guides to Chiapas.
In Asia, warmest thanks go to Walden Bello, Nicola Bullard, Shalmali Guttal
and Kamal Malhotra (Bangkok); Kate Bond (Chiang Mai); Gerard Greenfield
(Hong Kong); Ji-hoon Choi, Chan-geun Lee and Won Soon Park (Seoul); Byongdoo
Choi, Chan Keun Lee and Serapina Cha Mi-Kyung (Taegu); and Keiichi Yamazaki
(Yokohama).
3 Thanks for their time, interest and insights to Hans Abrahamsson, Christophe
Aguiton, Katharine Ainger, Yilmaz Akyuz, Michael Albert, Samir Amin, Giovanni
Arrighi, Andy Banks, David Barkin, Alejandro Bendana, Eve Bertelsen, Fred
Bienefeld, Tom Bramble, Jeremy Brecher, Paul Burkett, Horace Campbell, John
Cavanagh, Camille Chalmers, Chris Chase-Dunn, Noam Chomsky, Harry Cleaver,
Alexander Cockburn, Jane D’Arista, Julie Davids, Paul Davis, Brad DeLong, Javes
Devine, Norm Dixon, Peter Dorman, Michael Dorsey, Fiona Dove, John Dylan,
Martina Egli, Ben Fine, Laura Flanders, Jonathan Fox, Susan George, John
Gershman, Jayati Ghosh, Bill Greider, Sara Grusky, Vineeta Gupta, Tony and Eve
Hall, Gillian Hart, Marty Hart-Landsberg, David Harvey, David Hemson, Joe
Iosbaker, Jomo KS, Mark Jones, Josh Karliner, Naomi Klein, Martin Khor, Tom
Kruse, Paul Kumar, Annie Leonard, Kari Polanyi Levitt, Jamie Love, Erin
McCandless, Paddy McCully, George Monbiot, Martin Murray, Vicente Navarro,
Anders Nielson, Leonce Ndikumana, Zar Ni, Jim O’Connor, Ezekiel Pajibo, Raj
Patel, Medha Patkar, Michael Perelman, John Pilger, Erik Reinert, Ian Roberts, Max
Sawicky, Art Serota, Anwar Shaikh, Jim Shultz, Jeff St. Clair, Carlos Vilas, Hilary
Wainwright, Immanuel Wallerstein, Peter Waterman, John Williams, Daphne
Wysham, Koh Young-joo and Iris Marion Young. All honed my line of argument,
even if perhaps not yet to each of my counselors’ satisfaction.
And in addition to books by writers listed in these notes, I gained a great deal
from reading Harry Shutt’s The Trouble with Capitalism (London, Zed, 1998),
Michael Hardt and Toni Negri’s Empire (Cambridge, Mass., Harvard University
Press, 2000), and especially Robert Biel’s The New Imperialism (London, Zed, 2000).
4 These include, amongst many, Tamara Braam, Peter Benjamin, Omano Edigheji,
Sharon Edigheji, Patrick Flusk, Prathima Garbharran, Tony Hercules, Llanley
Simpson, Tawanda Mutasah, Daniel Plaatjies, Horacio Zandamela, Langa Zita, and
all the participants in a memorable March–April 2001 Sabi seminar on globalisation.
Acknowledge 7/22/03 6:26 pm Page xxi
A CKNOWLEDGEMENTS xxi
5 In addition to those listed already, I must mention Johannesburg lefties Glenn Adler,
Peter Alexander, Matseleng Allais, Franco Barchiesi, Florencia Belvedere, Chris
Bolsmann, Eddie Cottle, Molly Dhlamini, Nick Dieltens, Ann Eveleth, Sean Flynn,
Bonnie Friedman, Steven Greenberg, Ferial Haffajee, Lisa Hoyos, Mazibuko Jara,
Meshack Khosa, Bridget Kenney, Ulriche Kistner, Majbritt Fiil Laugesen, Sarah de
Villiers Leach, Oupa Lehulere, Moses Majola, David Masondo, Dale Mckinley,
Andile Mngxitama, Darrell Moellendorf, Sam Moiloa, John Molefinyane, Johny
Mphou, Prishani Naidoo, Tebogo Phadu, Caroline Riley, Bobby Rodwell, Melanie
Samson, Virginia Setshedi, Richard Sherman, Robyn Stein, Nicole Ulrich, Salim
Vally, Lucien van der Walt, Maria van Driel and Ahmed Veriava.
6 Before sometimes quite extensive modification, the chapters below initially
appeared in the following forms:
• Preface: ‘Globalisation, Economic Crisis and South African Vulnerabilities’, in
M. Khosa (ed.), Empowerment through Economic Transformation, Pretoria,
Human Sciences Research Council, 2000.
• Chapter one: ‘Globalisation, African Economic Crisis and South African
Vulnerabilities’, African Communist, November 1999; and ‘Sustaining US
Hegemony: The Economic Factor’, in Solidarity for Social Progress (Korea),
February 2001.
• Chapter two: ‘The Southern African Working Class: Production, Reproduction
and Politics’, in L. Panitch and C. Leys (eds), Socialist Register 2001: The Global
Working Class at the Millennium, London, Merlin and New York, Monthly
Review Press, 2000; and ‘Regionalism, Environment and the Southern African
Proletariat’, Capitalism, Nature, Socialism, 11(3), September 2000.
• Chapter three: ‘The IMF and World Bank Reconsidered’, in J. Coetsee, J. Graaf,
F. Hendricks and G. Wood (eds), Development: Theory, Policy and Practice,
Cape Town, Oxford University Press, 2001.
• Chapter four: ‘Foreign Aid and Development: South Africa’s Negative
Experiences and Perceptions, 1994–99’, Transformation, 45, 2001.
• Chapter five: ‘Global Economic Crisis: A View from South Africa’, Journal of
World Systems Research, 5(2), 1999; and ‘Their Reforms and Ours: The Balance
of Forces that Inform a New Global Financial Architecture’, in W. Bello, K.
Malhutra and N. Bullard (eds), Cooling Down Capital: How to Regulate
Financial Markets, London, Zed Press, 2000.
• Chapter six: ‘Pretoria’s Perspectives on Globalisation’, Politikon, 28(1), 2001.
• Chapter seven: ‘Can Thabo Mbeki Change the World?’, in R. Calland and S.
Jacobs (eds), Thabo Mbeki, Cape Town, IDASA, and Pietermaritzburg,
University of Natal Press, 2002.
• Chapter eight: ‘Globalisation, Pharmaceutical Pricing and South African Health
Policy: Managing Confrontation with US Firms and Politicians’, International
Journal of Health Services, 29(4), 1999.
• Chapter nine: ‘The Political Economy of HIV/AIDS Treatment Policy in South
Africa’, International Journal of Health Services, 31(2), 2001.
• Chapter ten: ‘Strategy, Self-Activity and African Grassroots Roles in the “Anti-
Globalisation” Movement’, in G. Kohler and E. J. Chaves (eds), Globalization:
Critical Perspectives, New York, Nova Press, 2001.
• Chapter eleven: ‘Defunding the Fund, Running on the Bank’, Monthly Review,
52(1), 2000.
• Chapter twelve: ‘A History of Finance and Uneven Geographical Development
in South Africa’, South African Geographical Journal, 80(1), 1998.
Acknowledge 7/22/03 6:26 pm Page xxii
Acronyms
Top: Prof. Fatima Meer, official biographer of Nelson Mandela and leading
social justice activist, Durban, March 2000.
Bottom: Archbishop of Cape Town, Njongonkulu Ndungane, and Truth
and Reconciliation Commissioner, Yasmin Sooka, Davos, January 2001.
Photo Spread 7/22/03 6:45 pm Page xxvi
PA R T ONE
CHAPTER ONE
1. Introduction
Rather than repeat the standard litany of pity and frustration over Africa’s
rock-bottom living standards and the minimal power and influence its
states possess in the arena of international relationships, let’s begin by
examining the continent’s problems in the context of the ongoing world-
wide economic crisis – with the aim of explaining why the economic decay
faced by South Africa and lower-income countries of the South reflect
global, not merely Third World, chaos.
To do so, we turn first to the analysis of South Africa’s current (2001)
ruling party, the African National Congress (ANC), of the global economic
crisis and its implications for South Africa.1 This discussion document,
which appeared in October 1998, was co-authored by Joel Netshitenzhe of
the ANC and Jeremy Cronin of the South African Communist Party, along
with the then-leader of one of the world’s most dynamic trade union move-
ments, Mbhazima Shilowa of the Congress of SA Trade Unions (Cosatu).
These central players in what is known as the Tripartite Alliance (which is
made up of the three organisations mentioned) were mandated to argue a
case within the ruling coalition. They had no qualms about using the ‘c’
word in their argument (even if, as we will observe later, this was mainly
bluster), so nor should we:
The present crisis is, in fact, a global capitalist crisis, rooted in a classical
crisis of overaccumulation and declining profitability. Declining profitability
has been a general feature of the most developed economies over the last
25 years. It is precisely declining profitability in the most advanced
economies that has spurred the last quarter of a century of intensified global-
ization. These trends have resulted in the greatly increased dominance (and
exponential growth in the sheer quantity) of speculative finance capital,
ranging uncontrolled over the globe in pursuit of higher returns.2
Grating as it might sound to the uninitiated, the paragraph above is a
helpful summary of three processes that will be examined below (in
Section 2):
Chapter 1 7/22/03 6:27 pm Page 4
In these ways, we will see, capital responds to crisis by shifting and stalling
its problems.
If this still seems excessively abstract, it won’t remain so once we track
the deadly implications of the crisis. For Africa, they are multifaceted, and
worthy of far more attention than I give them in Section 3 of this introduc-
tory chapter, which primarily considers aspects of trade and debt that
follow from the long-term global economic crisis. Nevertheless, I will
conclude in Section 4 that if current trends are very depressing, matters
must soon change, potentially in progressive directions. For I believe that
global crisis management will soon be exhausted, and with a break in power
relations, even the most venal African political/economic relations can then
be challenged from below, in a way that could lead us from the current
stage of despondency to a higher one of strategic clarity and mass activism.
Yet the problems run far deeper than the particular instances in which
sovereignty was ceded to financial markets, or neo-liberal ideology was
adopted locally by home-grown structural adjusters, or stop-gap measures
were imposed by Washington to redistribute resources from poor to rich,
from producers to financiers, and from South to North. Instead, I believe
the ANC Alliance’s intellectual leaders were correct when in 1998 they
identified the underlying issue as the ‘overaccumulation of capital’. It is
therefore to a discussion of this concept that we now turn.
This is not to say that the crisis has not been apparent, particularly from
Africa’s perspective, as I will show below. Financial meltdowns have been
visited upon a vast number of places and people across the globe since the
1970s, and have damaged the planet at a dramatic rate. The broader
economic crisis even left the working class in the United States with a 20%
collapse of per-worker wage-related income over a two-decade period
(1975–95).
Overall, however, it is crucial to acknowledge that Washington has so far
successfully co-ordinated the ‘management’ and ‘displacement’ of crisis
conditions. These crisis-displacement techniques, and the growing resis-
tance to them, are the subjects that occupy the rest of this book. But at the
outset, it is important to identify some key patterns in this process.
Financial power/fragility
Tracking the phenomenon of rising financial influence and volatility helps
us understand and react to Washington’s co-ordination of crisis ‘manage-
ment’ (if it deserves that purposive term). The volatility of the international
financial system since the mid-1970s stems from several factors:
profound changes in the incentive structure of investments, including a
decline in manufacturing profits during the late 1960s and a consequent
switch by many major firms of productive reinvestment into financial
assets;
the rise of the information society and economy;
institutional factors associated with financial sector concentration and
centralisation;
the diminishing power of nation states;
shortened investor time horizons; and
heightened geographic mobility, resulting in part from more rapid trans-
port and communications and other revolutionary technological
changes.
But gold then fell in value (to just over $250 at its low point in mid-1999)
as interest rates were raised to very high levels by the US Federal Reserve
Board from 1979, finally stabilising the US dollar and giving investors a
better return on assets than they got by holding gold. Simultaneously, in
spite of the disincentive of high interest rates, debt rose dramatically virtu-
ally everywhere, partly thanks to universal financial deregulation, which
opened up more credit-related products to corporations and ordinary
people.
In the US, for example, the ratio of all forms of credit-market debt to
GDP was fairly stable, in the 130–150% range from 1950 to 1975. It then
soared to 250% over the next two decades. As another reflection of finan-
cial/commercial turbulence, international commodity prices in general
suffered enormous downward pressure, losing more than 80% of their
value from a 1973 peak. At the same time, overinvestment in manufac-
turing began to result in growing gluts of products, which were exacerbated
when East Asian products flooded global markets during the 1980s and
1990s.
In the context of such commotion, it wasn’t long before various surface-
level financial bubbles began bursting in increasingly spectacular ways: the
Third World debt crisis (early 1980s for commercial lenders, but lasting up
to the present for the countries and societies involved); energy finance
shocks (mid-1980s); crashes of international stock markets (1987) and
property markets (1991–3); crises in nearly all the large emerging markets
(1995–2000); and even huge individual bankruptcies, which caused power-
ful international ripples. Examples from the late 1990s of financial/specu-
lative gambles gone very sour in derivatives, exotic stock-market positions,
currency trading and bad bets on commodity futures and interest rate
futures include Long-Term Capital Management ($3.5 billion in 1998), the
Sumitomo/London Metal Exchange (£1.6 billion in 1996), I.G.
Metallgessellschaft ($2.2 billion in 1994), Kashima Oil ($1.57 billion in
1994), Orange County, California ($1.5 billion in 1994), Barings Bank (£900
million in 1995), the Belgian government ($1 billion in 1997) and Union
Bank of Switzerland ($690 million in 1998).
Such financial shocks are likely to continue, for even the US economy has
grown increasingly vulnerable to substantial corrections on the basis of
unsustainable trade and debt imbalances (the current account deficit
reached 4.5% by the end of 2000), consumer and corporate borrowing (an
unprecedented 7% of GDP by the end of 2000), and stock-market over-
valuation. The latter was only partially corrected by the crash in 2000–01 of
most Nasdaq high-technology shares, exemplified by the destruction of half
the paper value of companies like Intel and Apple Computer over the
course of a few hours once they had issued profit warnings. In a few such
cases, wealthy investors were hurt. But mainly the world’s working-class
Chapter 1 7/22/03 6:27 pm Page 12
and poor and vulnerable groups and environments have paid the bill for the
financiers’ problems. The middle-income emerging markets were hit in
particularly acute ways during the late 1990s, with no end in sight to their
predicament.
a decision at the Cologne meeting of the G-8 in June 1999 to sell 10%
of the IMF’s gold to fund partial debt relief for the poorest Third World
countries;
statements by Britain’s Gordon Brown – in his role as head of the IMF
Interim Committee – indicating a desire to step up the IMF’s existing
capacities in areas of financial supervision and regulation;
the assembly of a ‘G-20’ group in September 1999 – led by Canadian
finance minister Paul Martin and including South African finance
minister Manuel – that includes many major emerging-market finance
ministers, to discuss further reform of global finance and other crisis-
avoidance techniques;
the proposal by President Bill Clinton at the IMF/World Bank meetings
in 1999 to write off 100% of debt owed to the US by 36 of the world’s
poorest countries, adding to momentum towards a millennial ‘gift’ to
avoid the extraordinary marginalisation of the ‘Fourth World’ that has
been noted in countless recent reports (a proposal followed 14 months
later by Britain);
the emergence of sufficient confidence within the international financial
system in late 1999 to allow Ecuador to default on its Brady Bond obli-
gations;
the successful interventions of the US and allied governments that
shored up the value of the newly introduced, fast-falling European
Union (EU) currency, the euro, in September 2000; and
further bailouts of desperate countries in late 2000, especially Turkey
and Argentina.
children, the elderly and the disabled) – the bailouts simply would not
prevent the conditions that caused the crises from re-emerging.16
strife did not deter TNCs, even although these conditions were regularly
highlighted and condemned by Transparency International (TI) and inter-
national agencies.
The only substantive FDI flows into Sub-Saharan Africa unrelated to
extractive minerals by 1999 were into South Africa ($1.4 billion). But on a
relative basis, that amounted to just $10 per $1 000 of GDP in South Africa,
which was the same as Zimbabwe. As I will discuss below, South Africa’s
own outflows of FDI, from firms with their headquarters in SA, exceeded
inflows, even before the repatriation of dividends/profits and the payments
of patent/royalty fees. Worse, statistics have never picked up the durable
problem of transfer pricing, whereby foreign investors steal money from
developing countries by falsely invoicing inputs drawn from abroad (e.g.
mining firms in South Africa through their offices in Switzerland). In any
event, the bulk of FDI into South Africa was based on mergers and acqui-
sitions, the most important of which was the partial privatisation of Telkom,
a critique of which I will offer in Chapter six. Many thousands of jobs were
lost in the process, and the transfer of inappropriate technology made
South Africa all the more dependent and vulnerable. In all of this, FDI did
not undergird the speculative financial flows with value-producing invest-
ments, but instead exacerbated them.
More evidence of the damage done not only by hot-money speculation
and FDI, but more generally by global economic volatility and stagnation,
can be seen by dissecting the central processes behind Africa’s crisis. There
are internal and external features to consider, and the latter include trade
and financial markets, and neo-liberalism’s failures.
Trade traps
In international markets, Africa has suffered unfair terms of trade (i.e. the
difference between prices paid for exports in relation to prices paid for
imports) since the peak of demand for its raw materials and before synthetic
substitutes were invented during World War II. From the mid-1970s, terms
of trade worsened, in part because of export-oriented policies, discussed
below, which most African countries were compelled to adopt once they
experienced a debt crisis.
The decline in the price index for the main (non-fuel) commodities
dropped especially dramatically from 1977 to 1982, while the export prices
Chapter 1 7/22/03 6:27 pm Page 20
Debt crisis
Rising debt is the second formidable external aspect of economic crisis in
Africa (Chapter 3 includes a lengthier discussion of its causes and conse-
Chapter 1 7/22/03 6:27 pm Page 21
quences in Southern Africa). The continent was drawn into a debt trap in
ways that in retrospect appear entirely unjustified. The two most obvious
problems were the use to which borrowed money was put, and the variable
rate at which most foreign debt was contracted during the 1970s. While
some of the debt originated in a need to cope with the increase in global oil
prices in 1973, much of the rest of the borrowed hard currency was unnec-
essary, destined for white-elephant projects, for arms expenditure and for
the import of luxury goods. The banks that lent the money were obviously
at fault for ‘loan-pushing’. Some of the money was understood to be lining
the pockets of corrupt elites, but international banks, the IMF and World
Bank ignored the moral implications of lending to a Mobutu, a Banda or a
Botha.
Moreover, during the initial rise in African foreign debt during most of
the 1970s, the interest rates on dollar-denominated loans were negative in
real terms (i.e. once inflation was discounted, it cost less to repay the loans
than they were initially worth). Then, in 1979, the interest payments
suddenly increased dramatically when the US Federal Reserve implemented
a ‘monetarist’ – i.e. high-interest-rate – policy. From negative rates in the
1970s, inflation-adjusted interest rates averaged 2% above the average
annual growth of the world economy (which was 3%) during the 1980s. A
related issue was the ‘collateral’ – i.e. security – for such loans. Such security
was thought not to be an issue, since sovereign countries in the post-war era
were not supposed to default. To this end, the IMF was used during the first
part of the 1980s as a vehicle for ensuring that African countries repaid loans
from Northern commercial banks, in exchange for the IMF gaining the
power over those countries to impose austere macroeconomic policies
which emphasised liberalisation, export orientation and an end to social
subsidies.
The World Bank also stepped in, expanding beyond individual project
and sector loans so as to finance fully fledged structural adjustment. All of
this represented little more than a bailout by Northern taxpayers of
Northern commercial banks through the IMF and World Bank. But incom-
ing funds continued to decline, and, by 1984, net financial-resource trans-
fers to the Third World were negative for the first time, as countries spent
more on interest payments than they gained in new loans. By the end of the
decade, the net South–North transfer had reached $50 billion a year, which
reflected the success of financiers in shifting the repayment burden not only
to Northern taxpayers but also to Third World citizens.
As a result, the Third World debt crisis was considered ‘solved’ by the
early 1990s, as most Northern banks had by then either received their Third
World loan money back through IMF/World Bank bailouts; or sold the bad
loans at a discount on ‘secondary markets’ of sovereign debt; or, quite
commonly, declared the loans as unrepayable for local tax purposes but
Chapter 1 7/22/03 6:27 pm Page 22
government budget cuts, increases in user fees for public services, and
privatisation of state enterprises (including even municipal services);
the lifting of price controls, subsidies and any other distortions of
market forces;
the liberalisation of currency controls and currency devaluation;
higher interest rates and deregulation of local finance;
the removal of import barriers (trade tariffs and quotas); and
an emphasis on the promotion of exports, above all other economic
priorities.
The effects of these policies have been quite consistent. Budget cuts
depressed the effective demand of African economies, leading to declining
growth. Often the alleged ‘crowding out’ of productive investment by
government spending was not actually the reason for lack of investment, so
the budget cuts were not compensated for by private-sector growth. The
implementation of privatisation often did not distinguish which state enter-
prises may have been strategic in nature, was too often accompanied by
corruption, and often suffered from the foreign takeover of domestic indus-
try with scant regard for maintaining local employment or production levels
(the incentive for this takeover was sometimes simply gaining access to
markets).
Moreover, there were no attempts by IMF and World Bank economists
to determine how state agencies could supply services that enhanced
‘public goods’ and merit goods. For example, the positive effects of water
supply on public health, environmental protection, local economic activity
and gender equality were never calculated. In this way, all state services
were reduced to mere commodities, requiring of their recipients full cost-
recovery through the elimination of subsidies.
A poignant example is water, which the World Bank has been pushing
many municipal governments in Africa to privatise. In a context in which
public-good effects of water supply were not factored into a World Bank-
designed national infrastructure policy, South Africa faced an outbreak of
cholera in August 2000 that led to scores of deaths and tens of thousands
of infections, costing tens of millions of rands, because low-income people
were not able to pay full cost-recovery on systems that then either broke
down or suffered cut-offs by municipal officials (saving a few tens of thou-
sands of rands). At the same time, the World Bank was circulating a docu-
ment entitled Sourcebook on Community Driven Development in the
African Region, which warned other World Bank staff that ‘work is still
needed with political leaders in some national governments to move away
from the concept of free water for all’. As for project work on water, these
staff were instructed to ‘Ensure 100% recovery of operation and mainte-
nance costs’.24
Chapter 1 7/22/03 6:27 pm Page 24
objective is the full cancellation of Third World debt by next year. The
movement – ‘Jubilee 2000’ (named after a statement in the Old
Testament’s Leviticus that debts should be periodically cleared to give
debtors a chance to recover) – played an effective role in bringing the issue
to international public attention. Though right-wing ‘allies’ – the Pope and
economist Jeffrey Sachs – endorsed a weak version of the Jubilee call, a
more durable ‘Jubilee South’ movement grew, holding summits in
Johannesburg in late 1999 and Senegal a year later.34
The tradeoff that the Jubilee movement posits is simple. Sub-Saharan
Africa paid the developed world $13.4 billion to service foreign debt in
1996, in part by borrowing $9.5 billion in new funds and using $2.6 billion
of aid payments from Northern countries. By way of contrast, the cost of
meeting basic goals in Africa for universal healthcare, nutrition, education
and family planning is estimated at about $9 billion a year. This kind of
money will not become available until the debt is cleared; but Africa’s many
leaders allied to Washington will never challenge the Washington-imposed
status quo of power relations on their own.
Consider the assessment by Southern Africa’s main debt negotiator
during the 1980s, Zimbabwean finance minister Bernard Chidzero,
discussing the IMF/World Bank annual meeting in 1989 at which he
chaired the misnamed ‘Joint Ministerial Committee on the Transfer of Real
Resources to Developing Countries’: ‘Curiously enough, debt was not the
central issue. It was at the back of everyone’s mind. But those who are
primarily concerned with the debt issue have been saying: “Look, the game
is being played. Don’t upset the applecart too much”.’35
The most important problem that arises from these experiences is
whether Africans can muster a combination of robust democratic activism,
protest around socio-economic grievances, technical critiques and propos-
als, counterhegemonic local-level development strategies and national-
policy advocacy. I will take this subject up again in Chapter eleven. First,
however, it is useful to change the focus from global and continental issues,
to regional and national issues (Chapters two to four), and explore the
extent to which the South African state is preparing a challenge to the
system (Part two), using the HIV/AIDS case as an example (Part three),
before moving on to a discussion of international activism (Part four).
Notes
1 For the full reference, see endnote 2, below. I provide a context for understanding
this document in Bond, P. (2000), Elite Transition, London, Pluto Press and
Pietermaritzburg, University of Natal Press, Chapter 6. In essence, the radical tone
reflected not only the deteriorating objective conditions of the country, but also,
subjectively, the need for rhetorical turns of phrase that would allow the previously
spurned left wing of the Tripartite Alliance back into the ‘National Liberation
Movement’ fold prior to the 1999 national election.
Chapter 1 7/22/03 6:27 pm Page 29
2 ANC Alliance (1998), ‘The Global Economic Crisis and its Implications for South
Africa’, ANC Alliance discussion document, October, Johannesburg, reprinted in
The African Communist, 4th quarter.
3 Marx, K. (1967 edn) Capital, New York, International Publishers, vol. 1, parts 3 & 4.
4 See especially Harvey, D. (ed.) (1999), Limits to Capital, London, Verso, for the
underlying theory of crisis formation and spatio-temporal displacement through the
financial and commercial circuits of capital. Robert Brenner’s more recent (2001)
statement of the evidence is based on careful study of intensified inter-core-capital-
ist competition (see Turbulence in the World Economy, London, Verso). Other
diverse, although at this level perhaps not irreconcilable, analyses of the 1970s–80s
stage of overaccumulation include Clarke, S. (1988), Keynesianism, Monetarism and
the Crisis of the State, Aldershot, Edward Elgar, pp. 279–360; Harvey, D. (1989), The
Condition of Postmodernity, Oxford, Basil Blackwell, pp. 180–97; Mandel, E.
(1989), ‘Theories of Crisis: An Explanation of the 1974–82 Cycle’, in M. Gottdiener
and N. Komninos (eds), Capitalist Development and Crisis Theory: Accumulation,
Regulation and Spatial Restructuring, London, Macmillan, pp. 30–58; Shutt, H.
(1999), The Trouble with Capitalism, London, Zed, pp. 34–45; and Biel, R. (2000),
The New Imperialism, London, Zed, pp. 131–89.
5 Arrighi, G. (1994), The Long Twentieth Century: Money, Power and the Origins of
Our Times, London, Verso.
6 I expand on this argument in a case study: Bond, P. (1998), Uneven Zimbabwe: A
Study of Finance, Development and Underdevelopment, Trenton, Africa World Press.
Further theory can be found in Bond, P. (1999), the entries entitled ‘Uneven
Development’ and ‘Finance Capital’ in P. O’Hara (ed.), Encyclopaedia of Political
Economy, London, Routledge.
7 Henwood, D. (ed.) (1998), Wall Street, London, Verso.
8 Bank for International Settlements (1999), Central Bank Survey of Foreign Exchange
and Derivative Market Activity 1998, Basle.
9 Standard Chartered Bank (1999), Annual Report 1998, London, p. 7.
10 Henwood, op. cit., pp. 324–7.
11 These US data and others below are from Henwood, op. cit., pp. 73–7 and 59.
12 Soros, G. (1998), The Crisis of Global Capitalism: The Open Society Endangered,
New York, Public Affairs.
13 Soros, G. (1997), ‘Avoiding a Global Breakdown’, Financial Times, 31 December
1997.
14 Bhagwati, J. (1998), ‘The Capital Myth: The Difference between Trade in Widgets
and Trade in Dollars’, Foreign Affairs, 77(3).
15 Camdessus, M. (1999), ‘Capital Flows, Crises and the Private Sector’, remarks to the
Institute of International Bankers, Washington, DC, 1 March, p. 9.
16 This latter point is made by Stiglitz, J. (1998), ‘Towards a New Paradigm for
Development: Strategies, Policies, and Processes’, Prebisch Lecture, UN
Conference on Trade and Development, Geneva, 19 October.
17 Statistics below come from UNCTAD (2000), World Investment Report, Geneva,
and Business Map (whose database often fails to distinguish between intended and
actual investments). Typically, an investment by a non-domestic source is formally
considered to be ‘foreign direct investment’ if the foreign ownership stake in a
venture is at least 10% and if there is a tangible influence on management of that
venture. This kind of subjectivity that even a major UN agency must resort to in its
measurement of FDI is obviously a major problem. Moreover, in part because of
UNCTAD’s strong ideological tilt towards neo-liberalism during the late 1990s
(under the presidency of South Africa’s trade and industry minister, Alec Erwin), the
Chapter 1 7/22/03 6:27 pm Page 30
figures below should be treated with extreme caution. To illustrate, UNCTAD meas-
ured $1.8 billion of FDI in Angola, while Business Map measured $0 in the SADC
energy and oil sector in the same year.
18 The subtitle (13 May 2000) explained, ‘Africa’s biggest problems stem from its pres-
ent leaders. But they were created by African society and history’.
19 Ake, C. (2000), The Feasibility of Democracy in Africa, Dakar, Codesria, p. 46.
20 Barratt-Brown, M. and Tiffen, P. (1992), Short Changed: Africa and World Trade,
London, Pluto Press, p. 3.
21 UNCTAD (1991), Commodity Yearbook, Geneva.
22 Elbadawi, A. and Ndulu, B. (1996), ‘Long-run Development and Sustainable
Growth in Sub-Saharan Africa’, in M. Lundahl and B. Ndulu (eds), New Directions
in Development Economics: Growth, Environmental Concerns and Governments in
the 1990s, London, Routledge.
23 Jubilee 2000 (1997), ‘Free Africa of Debt’, London.
24 World Bank (2000), Sourcebook on Community Driven Development in the Africa
Region: Community Action Programs, Africa Region, Washington, DC, 17 March
(signatories: Calisto Madavo and Jean-Louis Sarbib), Annex 2.
25 Mamdani, M. (1996), Citizen and Subject: Contemporary Africa and the Legacy of
Late Colonialism, Princeton, Princeton University Press, pp. 111.
26 Ibid, p. 287.
27 This was the obvious function of the key paper on this topic by former South
African Communist Party activist Geoffrey Lamb, who by the 1980s became influ-
ential in the World Bank. At one point he warned that World Bank ‘support for
technocratic policy elites’ should not be tempered by plausible deniability (on their
part), so as to ‘not too drastically compromise the recipients’ influence’. See Lamb,
G. (1987), ‘Managing Economic Policy Change: Institutional Dimensions’, Wash-
ington, DC, World Bank, p. 10.
28 World Bank (1994), Adjustment in Africa: Reforms, Results and the Road Ahead,
New York, Oxford University Press, p. 7.
29 For contrary evidence of the effects of adjustment on the rural poor, see, amongst
others, Ali, A. (1998), ‘Structural Adjustment and Poverty in Sub-Saharan Africa’,
in T. Mkandawire and C. Soludo (eds), African Perspectives on Structural Adjust-
ment, Ottawa, IDRC; and Costello, A., Watson, F. and Woodward, D. (1994),
Human Face or Human Facade? Adjustment and the Health of Mothers and Children,
London, Centre for International Child Health.
30 See, for example, World Bank (1994), World Development Report 1994: Infra-
structure for Development, Washington, World Bank.
31 The debate is covered in Bond, P. (2000), Cities of Gold, Townships of Coal: Essays
on South Africa’s New Urban Crisis, Trenton, Africa World Press, Chapters 3–4.
32 Mkandawire, T. and Soludo, C. (1999), Our Continent, Our Future, Ottawa, IDRC,
Trenton, Africa World Press and London, James Currey, pp. 74–5.
33 Southern African Political Economic Series (1998), SADC Regional Human
Development Report, Harare.
34 Links to Jubilee South can be found at http://aidc.org.za.
35 Southern African Economist, November 1989.
Chapter 2 7/22/03 6:32 pm Page 31
CHAPTER TWO
1. Introduction
Southern Africa is probably the world’s most extreme site of uneven
capitalist development.1 Inequality within and between the region’s
countries is severe, with race and gender domination largely undisturbed by
the post-colonial experience, with the environment taking enormous strain,
and with South Africa – and its 40 million of the region’s 102 million
citizens – responsible for $130 billion of Southern Africa’s $160 billion
formal-sector economic output in 1998.
It is logical to anticipate, as well, an uneven, fragmented evolution of
working-class power and political strategy, given the area’s different modes
of class struggle, levels of consciousness, organisational capacity, militancy,
and relations with political parties and other social forces. Yet as we shall
see here and in Chapter eleven, developments in one country act as major
reference points for others. And yet while Southern Africa’s rich radical
traditions – including once-avowed ‘Marxist-Leninist’ governments in
Mozambique, Zimbabwe and Angola, mass-movements and powerful
unions – owe much to revolutionary socialism and nationalism, this has not
so far given rise to an explicit regional class project.
The question that ultimately has to be posed, then, is whether a coherent,
cross-border vision can emerge to counteract the unevenness. Will ‘global-
isation’ provide an opportunity for this, through rising international work-
ing-class consciousness in reaction to the multinational corporate agenda?
Might the catalyst be a new round of parasitic South African corporate
investment in the region? Or will fragmentation prevail, as was already
reflected in the upsurge in South African working-class xenophobia in the
late 1990s?
To address these strategic political problems, as I have attempted to do
in Part four of this book, requires concrete, historical investigations linking
particular situations to general trends. Certain aspects of working-class
experience are, of course, regionally universal or at least comparable, in
part reflecting the importance and homogenising effect of cross-border
Chapter 2 7/22/03 6:32 pm Page 32
class power as early as the 1920s, often in the face of opposition from
higher-skilled white workers and artisans.
The ebb and flow of black working-class power was heightened by
impressive industrial unrest during the 1940s, followed by a downturn
associated with intensified state repression, the formal establishment of
apartheid in 1948 and the banning of trade unions or their leaders in many
of the colonial regimes. Later, from the 1950s, working-class power was
overlaid by the rise of national political movements. As these movements
gained progressively greater access to state power across Southern Africa –
and yet soon proved themselves hostile to working-class interests and
ambitions – workers had to decide whether and how to strive for a post-
colonial, post-nationalist and post-neo-liberal future.
In the immediate future, as Southern Africa remains mired in sustained
economic crisis, the logic of neo-liberalism will have to be contested not
only through defensive protest, but through both a new regionalism and
more effective international solidarity, to serve working-class interests and
those of poor people, and to protect regional ecology from corporate plun-
der. There exists a broad framework for this line of argument, namely a
United Nations World Institute for Development Economics research proj-
ect, whose leading African proponent, Samir Amin, advocates ‘regionalisa-
tion aiming at the building of a polycentric world’, in part grounded in
‘grassroots labour-popular social hegemonies’.2 It is with this potential proj-
ect in mind that I will attempt to document lines of cleavage between and
within the region’s working classes and state-capital alliances.
Hence the main sections of this chapter interrelate: Section 2 deals with
the historical colonial-capitalist origins of the region and the genesis of its
proletariats; Section 3 with the contemporary economic crisis; Section 4
with working-class responses to crisis conditions; and Section 5 with diver-
gent opportunities for regional class formation. At the site where these
come together – in the potential contestation of regionalism between work-
ers and the region’s states/capitals (dominated as they tend to be by South
African bureaucrats and corporations) – I will assess existing regional and
even global strategies and tactics in Part four, and propose new ones.
Worker power(lessness)
How, in this process, were indigenous African people disenfranchised and
(partially) proletarianised? Once the colonial spoils were divided at Berlin,
the British government mandated the Cape prime minister Cecil John
Rhodes and his British South Africa Company (BSAC) to seize a vast area
stretching north from Lesotho (then called Basutoland). The British military
beat back resistance from the region’s Africans (most decisively in Southern
Rhodesia during the 1890s) and from Afrikaners (in the Anglo-Boer War of
Chapter 2 7/22/03 6:32 pm Page 35
Worker power
Over the course of a century, resistance by black workers to this diabolical
system was often violent and decisive, but sporadic. Sometimes, every-day
survival strategies generated defensive mutual-aid societies, such as the
‘burial’ societies and social clubs (especially based on dancing, and oriented
Chapter 2 7/22/03 6:32 pm Page 36
across the whole semi-periphery, from Brazil and the Philippines to Poland
and South Korea, besides other Southern African countries. Cosatu served
as a regional role model and gave direct assistance to unions in Namibia,
Zambia, Zimbabwe and Swaziland.
In Namibia, a decade after the severe repression of the 1970s, unionism
made a comeback when mass stayaways won the support of 70% of
workers (in sympathy with school boycotts and opposition to South Africa’s
role in the country). But relations between nationalists and the unions were
often tense, as the former feared that too successful a union movement
would displace the national liberation movement. Ben Ulenga, leader of
Namibian mineworkers, faced bruising encounters with the South West
Africa People’s Organisation (Swapo), which summoned him to Europe
during a strike at Rössing Uranium mine to tell him that workers had no
right to decide when strikes should be called.10
Across the region during the 1960s–90s, nationalist politics dictated that
workers tone down or repress class demands, in the process undermining
internal democracy.11 During the early 1980s, ‘workerists’ within the South
African labour left – the Federation of South African Trade Unions (Fosatu,
later to become Cosatu) – saw their movement not only in terms of trade
unionism but also as a potential political alternative to the ANC’s
‘populism’. According to the Fosatu general secretary, Joe Foster, national-
ists ‘would destroy the unity of worker organisation. Our concern is with
the very essence of politics and that is the relation between the major classes
in South Africa, being capital and labour. We should not hesitate to attack
those who are impeding the development of a working class movement’.12
Conversely, the ANC writer known as Mzala contended: ‘It is actually
impossible for South Africa to advance to socialism before the national
liberation of the black oppressed nation.’13 Under pressure by the mid-
1980s, key workerists quietly made peace with nationalists, whose township
and rural prestige was immensely greater. Yet throughout the region,
powerful tensions between nationalism and socialism remained. When a
unified Marxist-Leninist-nationalist project (e.g. Zimbabwe, Mozambique
and Angola) graduated from oppositional to state power, the working
classes were inevitably disappointed.
Nationalism was not the only challenge to working-class politics. The
sensibility of Southern African labour transcends the boundaries of
factories, fields and mines, merging with broader social movements to
spawn a host of popular protest activities. Another challenge faced by
workers comes from market ideologues who have regularly blamed labour
militancy for stagnation. Yet working-class organisation and political
orientation are hardly responsible for the region’s structural social,
economic and environmental problems. For those, we must remind
ourselves of the very logic of capitalist crisis formation.
Chapter 2 7/22/03 6:32 pm Page 39
Historical precedent
Southern African economic prospects were perhaps most adversely affected
by South Africa’s skewed 20th-century industrialisation process and more
recent experiences of deindustrialisation. South Africa’s economy is itself
characterised by severe disarticulations. A ‘minerals-energy complex’ still
comprises the core quarter of the economy, encompassing gold, coal,
petrochemicals, electricity generation, processed-metals products, mining
Chapter 2
Table 2: Southern African socio-economic and labour-market conditions: Various indicators, mid-1990s–200015
40
7/22/03
Country GDP per Agric. Indus. Gini Human Population Lab. Force Formal Union Density
P OWERS
capita as % of as % of Coefficient Devel. (’000s) (’000s) jobs members (%)
(PPP US$) GDP GDP Index [% fem.] [civ. serv.] (’000s)
6:32 pm
AND VULNERABILITIES
Angola 1 839 12 59 n.a. .344 11 099 5 103 [46] n.a. [138] n.a. n.a.
Page 40
Lesotho 1 290 10 46 56.0 .469 2 023 825 [37] 250 [n.a.] 36 14
Mozam. 959 33 12 n.a. .281 18 028 9 145 [49] 450 [63] 190 42
Namibia 4 054 14 30 70.0 .644 1 584 435 [41] 260 [67] 106 41
Zambia 986 22 40 46.2 .378 8 275 3 854 [45] 469 [151] 280 60
Zimbab. 2 135 15 36 56.8 .507 11 247 4 948 [45] 1 497 [175] 350 23
Most years 1995 (consistency ensured in SADC Regional Human Development Report); PPP = Purchasing Power Parity; Industry
includes mining, energy and manufacturing; Density = union members as a % of formal sector jobs.
Chapter 2 7/22/03 6:32 pm Page 41
Post-nationalism?
Working classes are also increasingly adopting political positions in
opposition to their governments. As Namibian labour researcher Herbert
Jauch puts it, ‘With the SADC divided along political lines, trade unions
have achieved a higher degree of unity than ruling nationalist parties.’21 A
regional perspective and discourse may, indeed, override a variety of
national limitations. Fred Cooper argues that ‘The tension between
workers’ claims to globally defined entitlements and Africans’ assertions of
political rights as Africans was, during the 1940s and early 1950s, a creative
and empowering one.’22 In contemporary struggles, though, a regional and
more universalist paradigm potentially allows workers to raise demands for
higher standards of socio-economic rights more forcefully. In contrast, the
trap of nationalist corporatism, within a framework that supports competi-
tiveness, was a questionable labour strategy, once liberation movements
moved sharply right.23
Politically, Southern African unions spent some hard years in the post-
independence era breaking away from ruling-party tutelage and explicit
state repression (although Mozambican and Malawian unions are still
heavily influenced by their governments). In countries with relatively robust
Chapter 2 7/22/03 6:32 pm Page 46
Regional unionism?
However, simply counting union membership and estimating labour
influence over local politics is only the beginning. The ability of federations
Chapter 2 7/22/03 6:32 pm Page 48
and individual unions to embark upon major strike action is just as vital an
indicator of strength. In Zimbabwe, autonomous, shopfloor-based actions
outran the ability of national union bureaucrats to control or direct the
membership, and the corporatist strategy mistakenly pursued during the
mid-1990s by the Zimbabwe Congress of Trade Unions (ZCTU) quickly
became irrelevant. And in South Africa, despite the country’s deep
economic woes, union militancy increased as the state’s attack on public-
sector workers intensified.
Regionally co-ordinated actions and growing class-consciousness also
reflect progress. In Swaziland, for example, an 11-day general strike in 1996
and further strikes in 1997 led to solidarity in the form of a border blockade
organised by sister unions in South Africa and Mozambique, which forced
the anachronistic monarchy to concede worker rights. Indeed, new sections
of workers across the region are demanding similar rights to those won by
South African unions.
International and regional solidarity is probably the only real hope for
many of the less-resourced union movements, as well as the relatively
dormant Southern African Trade Union Co-ordinating Council (SATUCC)
itself. But given the difficult material conditions faced by regional unions
and the enormous tactical and strategic differences over international
economic policy (see Chapter eleven), it is vital first to enquire whether
there exists a basis for a regional working-class consciousness (as opposed
to retaining ties with nationalist allies).
have not yet established an alternative vision. To this end, SATUCC advisor
Dot Keet has proposed that to ‘deglobalize’ from neo-liberal, multinational
corporate and financial influence requires not only alliances with those in
the North seeking ‘innovative alternatives to over-producing/consuming
capitalism,’ but also a proactive, internally oriented regionalism.33
As I will argue in Part four, the elaboration of such an alternative
regional-global strategy is in the interests of poor and working people in
Southern Africa, and could also be the basis for a global working-class
strategy. Such a strategy would ultimately entail not only regional delinking
from neo-liberal imperialism (in alliance with Northern social and labour
movements, which would simultaneously weaken the grip of imperialism),
but also relinking along South-South axes. However, such a strategy must
first confront some extremely serious contradictions within the local and
international labour movements themselves, and in their relations with
national governments. These I will take up again in Part four.
Notes
1 To establish our boundaries, the Southern African Development Community
(SADC) comprises both strong and frail nation states: Angola, Botswana, the
Democratic Republic of the Congo (DRC), Lesotho, Malawi, Mauritius,
Mozambique, Namibia, South Africa, Seychelles, Swaziland, Tanzania, Zambia and
Zimbabwe. The large, well-populated but impoverished island of Madagascar also
belongs, geographically, but is generally excluded because of its isolation and
Francophone heritage. For the purposes of this chapter, I will mainly consider the
capital flows, labour movements and regional linkages within the ten most-southern,
mainland countries, i.e. omitting the DRC, Mauritius, Seychelles and Tanzania.
2 Amin, S. (1999), ‘Regionalization in Response to Polarizing Globalization’, in Bjorn
Hettne, Andras Inotai and Osvaldo Sunkel (eds), Globalism and the New
Regionalism, London, Macmillan, p. 77.
3 Similar imperatives were introduced in Portuguese-controlled Mozambique and
Angola, and in Namibia (the German-run former South West Africa until South
Africa took over after World War I. South Africa retained the name ‘South West
Africa’, then changed it to ‘South West Africa/Namibia a few years before
independence. For the sake of simplicity, I have called it ‘Namibia’ throughout.).
But such accumulation was mainly based upon extractive rather than settler-
oriented economics, through control of plantation labour.
4 Torres, L. (ed.) (1998), One out of Ten: The Labour Market in Southern Africa, Oslo,
Fafo, p. 56. Nearly half of these workers are from Lesotho, with another third from
Mozambique and the balance from Swaziland and Botswana. The definitive work on
migrancy is McDonald, D. (ed.) (2000), On Borders: Perspectives on International
Migration in Southern Africa, New York, St. Martin’s Press.
5 Roux, R. (1964), Time Longer than Rope, Madison, University of Wisconsin Press.
6 McKinley, D. (1997), The ANC: A Political Biography, London, Pluto Press.
7 Fine, R. and Davies, D. (1991), Beyond Apartheid, London, Pluto Press.
8 Raftopoulos, B. and Phimister, I. (eds) (1998), Keep on Knocking: A History of the
Labour Movement in Zimbabwe, 1990–97, Harare, Baobab.
9 Mayekiso, M. (1996), Township Politics, New York, Monthly Review Press; Ruiters,
G. (2000), ‘Urban Struggles and Urban Defeats in the 1980s’, Urban Forum, 11(1).
Chapter 2 7/22/03 6:32 pm Page 52
CHAPTER THREE
more powerful in the early 1980s has generated some fierce debates
amongst intellectuals. Three competing lines of argument usually emerge:
1) The IMF/World Bank perspective in Southern Africa aims to establish
‘sound macroeconomic policy’; to follow market processes rather than
resisting them; to halt ‘rentier’ (parasitic) activity by bureaucrats;
to promote sensible investments and policies that alleviate poverty,
enhance the role of women in development, and promote environ-
mental sustainability; and thereby contribute to efficient, effective gov-
ernance.
2) IMF/World Bank interventions are typically necessary, if insufficient, for
helping Southern Africa to engage the global economy; for utilising
regulated markets to achieve ‘sustainable’ financial and environmental
development; and for sending signals to the international community
that foreign investment is welcome. However, IMF/World Bank policy,
programmes and projects sometimes are badly phased; appear to be
‘one-size-fits-all’ in character (because they fail to take local conditions
into account); and cause social and environmental problems which must
then be mitigated through additional programmes.
3) The IMF/World Bank agenda has been – and continues to be – disas-
trous for Southern Africa, for it imposes eurocentric notions of
development and modernity; downgrades democracy by propping up
friendly authoritarian regimes; serves transnational corporate and
banking interests above all else; values people and nature less than
(narrowly defined) economic growth; hurts women, disabled people and
the vulnerable in society far more than other social sectors; amplifies an
already exceptionally unequal distribution of wealth; and often leads to
economic disaster, even on its own limited terms.
On the other side of the global class struggle at the turn of the century were
leaders like poet Dennis Brutus, Anglican Archbishop Njongonkulu
Ndungane, former Soweto city councillor Trevor Ngwane (fired from the
ANC for opposing a World Bank-influenced municipal privatisation
programme), sociologist Fatima Meer (the first official biographer of
Nelson Mandela), liberation theologian Molefe Tsele, and student leader
Chapter 3 7/22/03 6:32 pm Page 57
international financiers merely follow TNCs into new markets, banks exert
strong influence over TNCs in the normal course of business, in part
through a wide range of services: the financing of foreign subsidiaries; the
placing of medium-term Eurocredits and Eurobonds; the international
management of liquid assets and foreign exchange risks; leasing services;
consultation on finance and computing; and maintaining teams of industrial
experts capable of making technical assessments of investment projects.5
Indeed, by 1978, through such services and other command mechanisms,
banks ‘controlled’ 125 of the 487 leading companies in the world, up from
64 in 1965, according to one scholar.6 As the recessions of the 1970s
affected more and more economies, geographic shifts of funds followed the
higher profitability of larger TNCs relative to smaller firms in what had
become a unitary global economy.
As I discussed in Chapter one, the ‘overaccumulation’ of productive
capital had become a global phenomenon by this stage, as excessive capital
intensity in production had generated far more output than could be
absorbed through regular market channels. Corporate resources were rein-
vested less in overproductive manufacturing firms, given rising excess
capacity and declining rates of profit in the G-7 countries (from 20–30%
levels during the 1960s–70s to 5–15% during the 1970s–90s).7 Instead, they
were increasingly funnelled into the financial circuit of capital through a
variety of new international routes. The world’s two-dozen largest banks
controlled most of the action, granting three-quarters of the total amount of
loans to Third World borrowers. It was convenient that concentration
existed on the borrowing side as well: three-quarters of the credit of all
lenders went to fewer than a dozen large Third World and newly indus-
trialised countries. The Eurodollar market hence grew from $50 billion in
1973 to more than $2 trillion 15 years later, and in addition to European
banking centres, was increasingly located in unregulated hot-money
centres, e.g. the Cayman Islands, Hong Kong and the Bahamas. Along with
‘petrodollars’ centralised in New York banks mainly from Arab oil-produc-
ing states, the Eurodollars required an outlet, hence new explorations for
borrowers further afield, including in the Third World.8
If part of the pressure to free global financial flows from national
controls came from the internationalisation of productive capital, of equal
importance were changing monetary conditions in the US. Consistent prob-
lems with the US balance of payments (BoP) followed expenditures on the
Vietnam War and the Great Society (the BoP deficit tripled from 1957 to
1970), and left foreign traders less willing to hold dollars – previously the
currency to which all others were pegged – and to turn to gold instead. As
a result, US gold stocks fell from $24.6 billion – 70% of the world’s supply
– in 1949, to $20.6 billion in 1958 and to $10 billion in 1971. Justifying
President Richard Nixon’s decision to withdraw from the Bretton Woods
Chapter 3 7/22/03 6:32 pm Page 59
Kariba power
During the mid-1950s, the then-largest World Bank project (at a total cost
of $80 million) was the huge Kariba hydro-electric dam on the Zambezi
River border between Zambia and Zimbabwe. Because of its size, complex-
ity and the controversy associated with its development, Kariba deserves
some specific consideration.19 The dam created one of the world’s largest
inland bodies of water, generated massive amounts of hydro-electricity, and
spawned the birth of major tourism and fishing industries in what
previously had been an undeveloped area. But in the process, 56 000 Tonga
(Batonka) people were summarily displaced from ancestral lands and lost
their livelihoods without compensation, and many of them died because of
degraded resettlement conditions.
One source of electricity demand in colonial Zimbabwe was white
business and suburban consumption, which was enhanced by the World
Bank’s earlier $28-million electrification loan in 1952. But far greater
demand for Kariba energy was emerging from Zambian copper-field expan-
sion by South African, British and US multinational mining corporations.
‘Their role in the (regional) economy’ was, according to historian Colin
Leys, ‘in itself decisive and it is not too much to say that the meetings of
their boards of directors can be as important for the inhabitants of the
Federation as those of the Federal cabinet.’20 Hence the World Bank’s
Kariba loan catered for these interests, instead of those of the vast majority
of Zimbabweans and Zambians.
However, when the World Bank underestimated (by 50%) the money
that would be required to build Kariba, the two main beneficiaries – Anglo
American and Roan Selection Trust, together with their allied financiers the
British South Africa Co., Standard Chartered World Bank and Barclays
Bank – were approached by the Federation governor to provide a substan-
tial top-up loan to the project, on the grounds that with copper prices
soaring during the mid-1950s, the firms were enjoying a windfall they
should share. The resulting credit was nearly as large as the World Bank’s
contribution, and had the effect of diverting revenues that would have at
least partially been available for use in Zambia, causing severe strains in
intra-Federation relations. According to a World Commission on Dams
Chapter 3 7/22/03 6:32 pm Page 63
investigation into Kariba in 1999, the top-up loan ‘stole funds from the
Zambian government … Zambia was seeking funding for a large rural
development programme long discussed and promised to reverse the accel-
erated flow of rural people into the mining towns and along the line of rail’,
which the copper companies subsequently refused to support because they
had extended the Kariba credit.21
Another financing-related criticism of Kariba emerged in an official
expert-committee report in 1962, which noted the government’s over-
reliance on foreign-denominated loans from the World Bank, the US
Export-Import World Bank and the Commonwealth Development
Corporation. This financing method had generated ‘special problems in the
negotiation and amortisation of such loans, which may make them an
unsuitable vehicle for financing projects promising a return only in the
distant future. In the case of such capital expenditures, the obligation of
paying interest and the repayment of capital may become too burden-
some’.22
Indeed, the danger of foreign-currency loans for developmental
purposes was made by Rhodesian economist John Handford: ‘One of the
loans that had helped to build Kariba – that by the British Common-
wealth Development Corporation – proved somewhat expensive, be-
cause the interest payable on it was linked to the price of money by being
1% higher than the British Bank Rate. Thus, when recurring financial
crises in Britain led to raising of the Bank Rate, the cost of the loan also
rose.’23
The mismatch of lending – namely, foreign-currency obligations to pay
for local-currency assets – bedeviled not only Kariba, but became one of the
most important factors in the subsequent Third World debt crisis when
global interest rates soared, and continues to raise questions as to the merits
of large project-financing deals to pay for inputs such as dam cement, steel
and locally remunerated labour that can be acquired using domestic
currency.
Even where the World Bank was more inclined to consider the develop-
mental condition of indigenous majority populations, it again readily
adopted the colonial point of view, such as in Zimbabwe, where another
major loan, again denominated in hard currency, was aimed at implement-
ing the Native Land Husbandry Act of 1959. This law imposed alien
individual-ownership title systems on African communal lands, thus gener-
ating sufficient peasant protest to halt the process. Displacement appeared
under colonial logic as a means of accelerating economic development: ‘We
do not want native peasants’, Garfield Todd (a future prime minister) told
parliament during the early 1950s, ‘We want the bulk of them working in
the mines and farms and in the European areas and we could absorb them
and their families.’24 Cheryl Payer concluded that the World Bank-funded
Chapter 3 7/22/03 6:32 pm Page 64
Lesotho water 27
In South Africa, the World Bank’s history was just as controversial, for it
began developing business plans just two years after apartheid was
formally introduced in 1948, and the World Bank’s first loans –
$30 million to Eskom and $20 million for railways and harbours – were
granted in 1951. Follow-up loans of $162 million for both projects con-
tinued until 1968. Indeed, in the wake of the Sharpeville massacre in 1960,
when the sanctions movement gathered steam, the World Bank granted
loans worth $45 million to Pretoria, including $20 million in 1966 after
then-ANC president Albert Luthuli and Rev. Martin Luther King, Jr. had
called for financial sanctions against apartheid. There was no direct bene-
fit for black consumers who, because of apartheid, were denied Eskom
power that had been financed by the World Bank and whose prospects of
rail transport were mainly linked to their employment – if they possessed a
pass-book – in urban centres. The World Bank discontinued lending to
South Africa when the last Eskom loan (for a coal-fired power station) was
repaid, because per capita GDP rose to levels that disqualified access by
Pretoria.28
However, the World Bank still contributed to apartheid through the
Lesotho Highlands Water Project, which dammed rivers and tunnelled
through mountains to supply water to thirsty Johannesburg customers –
mainly wealthy households, white-owned farms and white-owned mines –
notwithstanding huge social and environmental costs. The loan was signed
in October 1986, following a Pretoria-sponsored coup which ousted
Lesotho prime minister Leabua Jonathan. This was at a time of harsh
repression in South Africa, after the foreign debt repayment ‘standstill’ of
September 1985, when there was little chance of South Africa getting access
to fresh foreign funds.29 Lesotho – with its $600 per-capita income and its
reliance on foreign aid for 20% of its GDP – was granted a World Bank
loan of $110 million, solely because of South Africa’s ability to stand surety.
Chapter 3 7/22/03 6:32 pm Page 65
(In fact, the only financial risk analysis in the World Bank’s initial report
was concerned with whether Pretoria would default.) The LHWP loan
came to be described as ‘sanctions busting’ by the first ANC water minis-
ter, Kader Asmal (though he later expanded the project, in the face of
strong community protest).30
As with Kariba, the LHWP was Sub-Saharan Africa’s largest-ever public-
works project. The first phase alone, costing $4 billion, involved construc-
tion of two dams and cross-catchment tunnels which will supply an
additional billion cubic metres of water to Johannesburg (for which annual
royalties of $50 million will be paid), as well as hydro-electricity to Lesotho.
Water ordinarily draining into the Orange River catchment area is now
being diverted through the mountains to the Vaal River in order to supply
the continent’s largest industrial complex, raising important social,
environmental and economic concerns. Indigenous communities in
Lesotho are witnessing large-scale displacement affecting 20 000 people,
loss of common resources like grazing land, topsoil and woodlots, loss of
income through land submersion, and flooding of ancestral burial grounds
(for which reimbursement and resettlement schemes were considered
unsatisfactory by a majority of residents, according to surveys in the late
1990s). There was also an increase in social problems consequent to dam
construction, including a dramatic increase in AIDS, alcohol abuse and
livestock theft. Under pressure from local church groups and international
NGOs, the World Bank and South African officials have been involved in
resettlement and compensation. But rural development programmes were
mired in corruption, as was the management of the Lesotho side of the
project (it was alleged that the Basothu chief executive officer of the
LHWP, Musapha Sole, was provided with bribes from some of the largest
construction companies in the world, including ABB of Switzerland,
Impregilio of Italy and Dumez of France, over a ten-year period).31
The environmentalist critique has also been difficult to resolve. The
LHWP exacerbates Lesotho’s scarcity of cultivated land (only 9% of the
country can be used for farming), hence pushing peasants onto soil more
vulnerable to erosion. The dams also destroy crucial habitats of the Maluti
minnow (an endangered species), the bearded vulture and four other
species considered ‘globally threatened’. Moreover, early LHWP feasibility
studies failed to include an environmental-impact assessment; linings for
tunnels were inadequate and had to be cemented; reservoir-induced earth-
quakes were far worse than anticipated; and soil erosion and sedimentation
– which typically lower dam capacity by 1% per year and silt up intake
areas – were not initially taken into account. Lesotho’s own access to water
has also become a matter of concern, with experts now certain that there is
insufficient water in the country to share with South Africa beyond the still-
planned LHWP Phase 2, and within ten to thirty years, Lesotho would
Chapter 3 7/22/03 6:32 pm Page 66
itself probably face a condition of water scarcity.32 The capital city, Maseru,
suffered a serious water shortage in late 1999, for example.
There was also a consumer critique of the LHWP, especially the World
Bank’s role, from Soweto and Alexandra township residents, who argued
that the financing of the project makes water provision to low-income black
residents of Johannesburg more, not less, difficult. The World Bank’s
estimates in the mid-1980s of anticipated demand in the Witwatersrand
area (now Gauteng Province) were, by task manager John Roome’s own
estimation, higher by 40% than actual consumption in the late 1990s,
which meant that the first Lesotho water destined for the Vaal in early 1998
had to be redirected back to the Lesotho lowlands. In 1995, approximately
1.5 million residents of Gauteng did not have direct access to water, and to
supply them with 50 litres per person per day would have required only
22 million cubic metres of additional supply annually, representing a small
fraction of the water that middle- and upper-income consumers used to
water gardens and fill swimming pools. The LHWP’s first two phases will
supply a billion more cubic meters of water to Gauteng each year.33
Furthermore, in addition to hedonistic water use by wealthy consumers,
a vast proportion of incoming water – approximately half in most town-
ships – leaks out of Gauteng’s apartheid-era infrastructure, which black
households are expected to pay for. The possibilities for conservation not
only from fixing infrastructure but imposing limits on suburban household
and industrial consumption were estimated by some credible officials at
40%. But the LHWP water-distribution structure meant that the main
catchment-area intermediary (the Rand Water Board), which should have
been in a position to fix leaks and promote conservation through ‘demand
side management’, had the reverse incentive, namely to charge municipali-
ties for high-level consumption in order to make payments on LHWP inter-
est charges. Therefore, given limited municipal resources, the expectation
was that the leaks would not be fixed. As a result, for consumers to pay for
the LHWP would mean raising the marginal price of water dramatically
(the World Bank suggested by a factor of five once Phase 1B is complete,
to accurately reflect cost increases). Moreover, while bulk-water charges to
municipalities rose by 35% between 1995 and 1998 mainly because of the
LHWP, the levy for the first block of the Johannesburg block tariff, i.e. the
lowest block, increased by 55%, indicating that, relatively speaking, first-
block consumers paid a higher proportion of the increase than did
consumers who used more water.34
For Gauteng township consumers who could not pay their bills, water cut-
offs soon began to occur, following Roome’s suggestion made in 1995 that a
‘credible threat of cutting service’ was needed to discipline residents who
continued the municipal payments boycotts begun during the 1980s.35 In
contrast to the apartheid era, in which water cut-offs were extremely rare – in
Chapter 3 7/22/03 6:32 pm Page 67
IMF/ World Bank strategy of pushing every Third World country to export
more, resulting in declining prices and rising debt burdens. But the partic-
ular way in which Southern African economies – Mozambique, Zimbabwe
and South Africa, for example – were restructured during the 1980s–90s
deserves brief attention.
and those from within the exiled ANC. The World Bank conceded its
‘strongly negative image, particularly among ANC cadres who viewed the
World Bank through the lens of their experience in other African countries
undergoing structural adjustment’.38 Sensitivities were initially addressed
by World Bank team leader Geoffrey Lamb (the former SA Communist
Party intellectual), who set up specialist teams to analyse conditions and
generate policy options in macroeconomics, industry, health, education,
housing and land reform from 1991 to 1994.
The World Bank agreed, apparently reluctantly, that there would be no
loans to the De Klerk government.39 The World Bank earnestly desired
legitimacy from working with the incoming ANC government (Nelson
Mandela was periodically fêted in Washington during the early and mid-
1990s by World Bank and IMF leaders), and it saw South Africa as an ideal
place to establish the function now termed the ‘Knowledge Bank’.40 Indeed,
the sole World Bank loan to the first democratic South African government
– worth just R340 million (although in fact only around half that amount
was actually used) – was only granted in 1997, for the purpose of making
small and medium enterprises more globally competitive.41 This reflected,
in part, the power of social movements and Pretoria’s difficulty in justifying
foreign-sourced financing for development in a context of highly liquid
domestic financial sources.
The real impact of the World Bank in post-apartheid South Africa was
therefore witnessed not through lending, but in policy advice: land reform,
housing, healthcare, public works, child-welfare finance, infrastructure,
industrial development and macroeconomic policy. There were no doubt
others, but as the World Bank itself said in 1999, ‘several successful initia-
tives had no formal outputs or public recognition of our role’.42 The most
high-profile initiative, however, was the Growth, Employment and
Redistribution strategy. But this became a severe embarrassment to World
Bank macroeconomic modellers (one of whom, Richard Ketley, subse-
quently left the World Bank to play a crucial role in the Department of
Finance, before continuing, in 2000, to another well-remunerated position
at the Deutsche Bank).43
In addition to World Bank policy advice, two far lower-profile World
Bank subsidiaries – the International Finance Corporation (IFC), its
investment-ownership arm and the Multilateral Investment Guarantee
Agency (MIGA) – were active in South Africa. From 1996, IFC investments
soon topped $100 million (in financial services, pulp and paper,
cement/construction, privatisation of municipal infrastructure, private
healthcare and a Domino’s Pizza franchise, though the latter went bankrupt
in late 2000). MIGA provided tens of millions of dollars in investment
guarantees, as well as supporting SA corporate investment in the con-
troversial Mozal aluminium smelter in Maputo.44
Chapter 3 7/22/03 6:32 pm Page 70
The World Bank and IMF role in South Africa was obviously highly
controversial, and the effects of structural adjustment were hotly debated
between proponents with widely divergent ideologies. Of the three
discourses about the Bretton Woods institutions noted in the introductory
section earlier in this chapter, the first and third were most in evidence in
South Africa. But experiences in Zimbabwe and Mozambique provide
additional perspectives.
Zimbabwe’s plunge
In Zimbabwe, matters were both more blunt – IMF/ World Bank structural-
adjustment conditionality was not in the least disguised, as I will show
below, particularly when Zimbabwe became desperate for foreign exchange
in 1999 – and far more complicated. Indeed, a full interpretation of IMF and
World Bank policy roles entails not only an assessment of the failed struc-
tural adjustment programme of the 1990s, but also of a variety of other
sectoral- and project-loan interventions dating back to the early 1980s. But
the main lesson to be learned from Zimbabwe relates to the second of the
three discourses noted at the outset: the origins of the view that IMF/World
Bank structural-adjustment policies are ‘necessary but insufficient’.
In its oppositional statement about an alternative to adjustment, even the
Zimbabwe Congress of Trade Unions (ZCTU) posed a crucial limitation on
its own future strategies, namely that ‘there can be no return to pre-ESAP
policies, partly because of the stranglehold that foreign creditors have on
policy through the substantial debt that has accumulated, paradoxically,
because of the failure of the policy’. As ZCTU leader Morgan Tsvangirai
put it in his preface to the ZCTU publication, Beyond ESAP: ‘While
acknowledging that SAPs are necessary, the study shows that they are in-
sufficient in fostering development.’45 (A more traditional labour discourse
would have generated the affirmation that ESAP was unnecessary and
indeed that it underdeveloped Zimbabwe during the 1990s.)
To comprehend this apparent concession to orthodox ideology, and the
overwhelming material and financial power of the IMF/World Bank which
it reflects, some background is necessary. For two decades after independ-
ence in 1980, Zimbabwe suffered an unusual mix of populist government
rhetoric from a nominally ‘Marxist-Leninist’ ruling party; white corporate
domination of the industrial, agricultural, financial and services sectors; and
an inability to break into global markets. President Robert Mugabe steadily
condoned an ever-greater role for the private sector in Zimbabwe’s
development, in the process taking on vast quantities of international debt.
One reason was the role played by finance minister Bernard Chidzero,
who advocated borrowing massively at the outset, in the belief that repay-
ments – which consumed 16% of export earnings in 1983 – would ‘decline
sharply until we estimate it will be about 4% within the next few years’.46
Chapter 3 7/22/03 6:32 pm Page 71
The World Bank, which lent $700 million to Harare during the 1980s and
made Chidzero head of its ‘Development Committee’, concurred:
‘The debt service ratios should begin to decline after 1984 even with
large amounts of additional external borrowing.’47 In reality, Zimbabwe’s
debt servicing spiralled up to an untenable 35% of export earnings by
1987.
Loan conditions quickly emerged. By 1985, the IMF pressured Mugabe
to cut education and health spending, and in 1986 food subsidies fell to two-
thirds of their levels in 1981. Similarly, land reform was stymied not only by
the 1979 Lancaster House constitution’s ‘willing-seller, willing-buyer’
compromise, but by the World Bank’s alternative to redistribution, i.e.
showering peasants with unaffordable microloans. From a tiny base in 1980,
the World Bank’s main partner agency granted 94 000 loans by 1987. But
without structural change in agricultural markets, the strategy floundered, as
80% of borrowers defaulted in 1988 (good rains notwithstanding).48
Chidzero then persuaded Mugabe to ditch Rhodesian-era regulatory
controls on prices and foreign-trade/financial flows. The Economic
Structural Adjustment Programme, which ran from 1991 to 1995, was
heavily promoted by the World Bank and IMF. The programme failed
decisively, not simply because of two bad droughts in 1992 and 1995. The
overall structure of Zimbabwe’s economy and society left it ill-suited for
rapid liberalisation and its resultant extremely high real interest rates, a
dramatic upsurge in inflation associated with the lifting of price controls
and devastating cuts in social-welfare spending.
Worse, social policy went into reverse gear. As a direct result of funding
cuts and cost-recovery policies, exacerbated by the AIDS pandemic,
Zimbabwe’s brief rise in literacy and health indicators in the 1980s was
dramatically reversed. In contrast, the stock-market reached extraordinary
peaks in mid-1991 and mid-1997, but these were followed by crashes of
more than 50% within a few months, along with massive hikes in interest
rates. Although growth was finally recorded in 1996–97, it quickly expired
when international financial markets and local investors battered
Zimbabwe’s currency from November 1997 onwards, ultimately shrinking
the value of a Z$ from $0.09 to $0.025 over the course of a year. As a result,
unprecedented inflation was imported, leading in January and October
1998 to urban riots over maize and fuel-price hikes.49
As Mugabe stumbled, as economic grievances intensified, as public-
sector employees and other workers increasingly went on strike, and as
evidence of political unaccountability mounted, the ZCTU became more
political. In early 1999, the National Working People’s Convention gave a
strong civil-society endorsement to the formation of an opposition party,
which was formed in September 1999 and was known as the Movement for
Democratic Change (MDC).
Chapter 3 7/22/03 6:32 pm Page 72
scheduled for June 2000, Mugabe condoned and encouraged land invasions
of more than 20% of Zimbabwe’s white-owned farms. The situation
degenerated into deeper economic crisis and sustained conflict verging on
anarchy.
By October 2000, Zimbabwe had accumulated six months of World
Bank arrears and, desperate to regain access to hard currency, Mugabe
authorised the new technocrat finance minister, Simba Makoni, to begin
paying the World Bank. By paying $50 million, Mugabe hoped for
$140 million in new loans, but this was quite a gamble. Indeed, Zimbabwe
had joined the list of countries like Iraq, Yemen and the Democratic
Republic of the Congo considered to be basket cases. Confusingly, the
opposition MDC spent 2000 calling for both the Zimbabwe Democracy Act
to be passed on Capitol Hill (sponsored mainly by white, conservative
Republicans), which would prohibit new IMF/World Bank loans to
Zimbabwe, and for more IMF/World Bank-type economic programmes.
The contradictions will perhaps be resolved by the presidential election in
2002, but whether the MDC will turn left or right on economic policy if
they win it is still up in the air.53
In sum, Zimbabwe’s post-1997 plunge can, at a superficial level, be
traced to the problems Mugabe himself caused with one political blunder
after another. But it is also more generally a direct outcome of the context
of the early 1990s in which, structurally, his government’s power and his
own decisions were repeatedly limited, conditioned and ultimately reversed
by Washington.54
A year later, more than 70 new conditions emerged in the next IMF debt-
relief package, including a recommendation that parliament make the tax
structure more regressive (i.e. so that the rich would pay a decreasing share
of their income). At this stage, the IMF used new jargon in applying its neo-
liberal conditionality to the rural water sector, stating that the aim of its
programme was that of ‘transforming the planning and delivery of rural
water and sanitation services from a supply-driven model to a sustained
demand responsive model, characterised by community management, cost
recovery, and the involvement of the private sector’.57 Trendy language
cannot disguise the fact that such a ‘demand responsive model’ was an
increasingly discredited development strategy, having failed dramatically
when applied to rural water projects in far wealthier countries like South
Africa (leading in 2000–01 to tens of thousands of cholera cases). Such cost-
recovery strategies simply don’t work in a country in which 70% of the
population live below the poverty line. Still, for mainly ideological reasons,
the World Bank continued pushing 100% cost-recovery policies on water
projects across Africa, while lobbying African governments ‘to move away
from the concept of free water for all’.58
In 1999, however, increased public pressure against the IMF and World
Bank – including Chissano’s own public frustration over HIPC – led to
slightly greater concessions for Mozambique, and repayments fell to
$73 million and then to $58 million by 2001. Nevertheless, the IMF and
World Bank remained crudely callous towards Mozambique’s grinding
Chapter 3 7/22/03 6:32 pm Page 75
poverty, and were unmoved even by the floods that devastated Mozambique
in January and February 2000. Instead of providing more debt cancellation,
Washington offered only to reschedule repayment by adding the amount
due that year to the end of the amortisation schedule.
So, for one of the world’s poorest countries, the experience of HIPC
debt relief shows how the combination of international financial power,
unrepayable debt and the Washington Consensus economic philosophy can
be a lethal combination. In part because of experiences such as
Mozambique’s, and in part because the implications of the financial volatil-
ity experienced by Zimbabwe and South Africa were so threatening, an
international movement arose during the 1990s to contest the Bretton
Woods institutions, aiming not only for reforms, but for their complete
closure.
We investigate that social movement in Part four, following discussions
of the South African government’s strategy for reforming the Bretton
Woods twins and the world economy, and the tragic failure to make head-
way against the global apartheid implicit in differential access to HIV-AIDS
treatment. However, a final example of dominance over South Africa by
Washington and its allies should first be considered, namely overseas
development aid.
Notes
1 A key Zimbabwean was Callisto Madavo, who became World Bank vice-president for
Africa. Other South Africans included Hennie van Greuning (former registrar of
banks at the Reserve Bank in Pretoria during a crucial period of deregulation and
financial chaos in the early 1990s), Kam Chetty (once a left-wing Cape Town NGO
activist, then a civil-society fixer for the World Bank’s Pretoria office), Roland White
(former anti-apartheid student leader, later responsible for many of the worst neo-
liberal processes in municipal infrastructure when he worked for the Department of
Finance in Pretoria during the late 1990s), Alan Gelb, a pro-liberalisation trade econo-
mist, and Jeff Rackie, an urban planner, all of whom played damaging roles in South
Africa’s socio-economic development processes in the 1990s. An interesting exception
was that of Ismail Lagardien, former executive committee member of the Azanian
People’s Organisation, then main assistant to Trevor Manuel when he was SA minister
of trade and industry, and then speechwriter for Joseph Stiglitz when as World Bank
chief economist he unveiled the ‘Post-Washington Consensus’ critique of the IMF.
2 Amongst other Southern Africans who were highly regarded in the international
activist community were Bishop Bernadino Mandlate from Maputo, Jonah Gokova
and Davie Malungisa from the Zimbabwe Coalition on Debt and Development,
Godfrey Kinyenze of the Zimbabwe Congress of Trade Unions, Mauritian activists
Rajni Lallah and Alain Ah-Vee, Zambian economist Opa Kapijimpanga from the
Harare-based African Debt and Development Network, Rosemary Nyerere
Mwamakula and Rogate Mshana from the Tanzania Debt and Development
Coalition and World Council of Churches, and Francis N’Gambi and Michael
Nyirenda of the Malawi Debt and Development Coalition.
In South Africa, other key global-issue activists/strategists included Jubilee
2000’s Neville Gabriel, community/women’s activists Mercia Andrews and
Chapter 3 7/22/03 6:32 pm Page 76
Lindelwe Nxu, NGO leader Abie Ditlhake, Jubilee South co-ordinator Donna
Andrews, Johannesburg media activist Ashraf Patel, SA Municipal Worker Union
staffers Roger Ronnie, Lance Viotte and Anna Weekes, environmentalists Bobby
Peek, Chris Albertyn, Richard Sherman, Tebogo Phadu, Jessica Wilson and Liane
Greeff, health activist Zackie Achmat and several Alternative Information and
Development Centre associates (Trevor Ngwane, Andrews, Carl Brecker, Brian
Ashley, Dot Keet, Jeff Rudin and George Dor).
Combatting the WTO with extraordinary effectiveness were Mohau Pheko of
the Africa Trade Network in Johannesburg, Kato Lambrechts of the Institute for
Global Dialogue (subsequently Christian Aid), and the brilliant Ugandan political
economist Yash Tandon, based in Harare. Amongst South African labour activists
with international influence were Cosatu’s Zwelinzima Vavi and Ibrahim Patel
(although their role at the WTO Seattle protests was severely compromised by their
collaboration with the controversial South African delegation).
Many other South African militants not only thought globally but worked
locally, concentrating on building opposition to the IMF/World Bank at local
level (with marches and events on 26 September 2000 in Johannesburg, Durban,
Cape Town, Pietersburg and East London), including Campaign Against
Neoliberalism in South Africa, the SA Non-Governmental Organisations
Coalition, the SA Communist Party, the ‘Keep Left’ collective, the Anti-
Privatisation Forum, the Treatment Action Campaign, the Northern Province’s
Movement for Delivery, the Soweto Electricity Crisis Committee, Jubilee chapters
in KwaZulu-Natal, Western Cape, Eastern Cape, Northern Province and
Gauteng, a few other progressive thinktanks (such as the International Labour
Research and Information Group, the National Institute for Economic Policy, the
National Labour and Economic Development Institute, and the Institute for
Global Dialogue), environmental groups (Environmental Monitoring Group,
Earthlife Africa, Group for Environmental Monitoring and GroundWork) and
the more advanced trade unions in Cosatu (especially the SA Municipal Workers
Union, the SA Democratic Teachers Union and the National Education, Health
and Allied Workers Union).
The main activist perspectives are analysed in Part four.
3 For background, see Block, F. (1977), The Origins of International Economic
Disorder, Berkeley, University of California Press; Parboni, R. (1981), The Dollar and
its Rivals, London, Verso; Wachtel, H. (1986), The Money Mandarins, New York,
Pantheon; Wood, R. (1988), From Marshall Plan to Debt Crisis, Berkeley, University
of California Press; and Caufield, C. (1997), Masters of Illusion: The World Bank and
the Poverty of Nations, London, Macmillan.
4 For example, during the Great Depression, when the previous excesses of financiers
were addressed in US legislation, strict regulatory constraints affected the domestic
operations of American banks – including bans on interstate banking, harsh restric-
tions on the scope of banking activities, and severe limits on the amount of interest
that banks could pay depositors. This led to increasing pressure to explore foreign
markets. An ‘interest equalization tax’ was imposed in the hope of making capital
flight more costly, but actually encouraged it in the long run by providing an
unprecedented incentive to US banks to set up foreign branches immune from the
regulation. Under such domestic constraints, major US banks spent the 1960s
rapidly expanding their international branch networks in search of new markets.
Eleven US banks had 181 foreign branches in 1964; by 1974, 129 US banks oper-
ated 737 foreign branches. For details, see Mayer, M. (1984), The Money Bazaars,
New York, Simon & Schuster.
Chapter 3 7/22/03 6:32 pm Page 77
39 Tellingly, rural mission leader Robert Christiansen and the director of a local World
Bank-aligned research NGO (the Land and Agricultural Policy Centre) flagged ‘a
suspicion on the part of many South Africans that the focus of the World Bank’s
program in any country was the need to lend and to dictate policy as a precondition
to that lending’. Christiansen, R. and Cooper, D. (1994), ‘Presentation to 14th
Symposium on Agriculture in Liberalizing Economies’, Washington, DC.
40 See World Bank (1998) World Development Report: Knowledge and Development,
Washington, DC.
41 World Bank (1997), ‘South Africa: Industrial Competitiveness and Job Creation
Project’, Washington, DC, Africa Regional Office.
42 World Bank, South Africa: Country Assistance Strategy, p.18.
43 Virtually all Gear’s targets were missed by vast margins. National Institute for
Economic Policy, NGQO: An Economic Bulletin, 1(1), http://www.niep.org.za,
pp. 1–3.
44 World Bank, South Africa: Country Assistance Strategy, pp. 19, 35 and 43.
45 Zimbabwe Congress of Trade Unions (1996), Beyond ESAP, Harare, pp. 61 and i.
46 Herald, 22 February 1983.
47 World Bank (1992), Zimbabwe: Power Project, Washington, DC, Energy Division,
Eastern African Regional Office, Report #3884-ZIM, p. 3.
48 Bond, P. (1998), Uneven Zimbabwe, Trenton, Africa World Press, Chapter 10.
49 Bond, P. (1999), ‘Zimbabwe’s Political Reawakening’, Monthly Review, 50(11).
50 Financial Gazette, 12 March 1999.
51 Agence France-Presse, 20 July 1999.
52 Hanlon, J. (1988), Beggar Thy Neighbour, London, James Currey, p. 35.
53 I have laid out more detailed arguments along these lines in Bond, P. (2000),
‘Movement for Democratic Change at the Eddie Crossroads’, Southern Africa
Report, second quarter; (2001), ‘Radical Rhetoric and the Working Class during
Zimbabwean Nationalism’s Dying Days’, Journal of World Systems Research, May;
and (2001), ‘Inward versus Outward Orientation in Post-Nationalist Zimbabwe’,
Labour, Capital and Society.
54 As I argue in Uneven Zimbabwe, the economic crisis dates back further, to the mid-
1970s, when overaccumulation became a severe problem.
55 More background on the destructive role of the IMF in Mozambique can be found
in Hanlon, J. (1997), Peace without Profit, London, James Currey.
56 Details provided in Bond, P. (1998), ‘Mozambican Parliament Questions Debt
Management’, Sunday Independent, 21 December; and see rebuttal letters from the
World Bank’s Mozambique officer Phyllis Pomerantz on 24 January 1999, and from
myself and Joe Hanlon on 7 February 1999 and 11 July 1999. See also Denny, C. and
Elliott, L. (1999), ‘Fund Admits Debt Plans will Fail Poor’, Guardian, 19 April.
57 International Monetary Fund (1999), Mozambique: Enhanced Structural Adjustment
Facility Framework Paper for April 1999–March 2002, Washington, DC.
58 World Bank (2000), Sourcebook on Community Driven Development in the Africa
Region: Community Action Programs, Washington, DC, Africa Regional Office,
17 March (signatories: Calisto Madavo and Jean-Louis Sarbib), Annex 2.
Chapter 4 7/22/03 6:39 pm Page 80
CHAPTER FOUR
51%, and the amount disbursed compared to that committed was only 13%.3
Even by mid-1999, fully two-thirds of the previous five-years’ worth of EU
pledges had not been spent.4 Yet while government could not disburse its
own development-related monies in housing, infrastructure, land reform and
many other fields, due to lack of capacity, foreign donors simultaneously
shifted from funding civil society to funding the state, as I will describe below.
Although it is small in comparison to the wide variety of state spending
programmes, at just 2% of the national budget, aid contributes a substan-
tial share to South African development funding, particularly of capital
projects. Given that the state spends a large amount of its budget (90%) on
recurrent costs, foreign aid can be decisive in shifting capital expenditure
into areas donors decide – although sometimes without much reference to
sustainability, maintenance and infrastructure. It was presumed that many
aid missions would end their work after 1999, once democratic develop-
ment policies were established and implementation got under way, but
most have continued to justify a presence on the basis of unfulfilled
programme and project implementation.
Studies of post-1994 aid to South Africa are only now beginning in
earnest.5 Donors, state officials and civil society recipients are reliant for
assessments upon popular perceptions sometimes captured in the media,
and upon hidden consultancy reports. The largely negative character of the
former and apolitical nature of the latter are themselves of interest. Until a
more comprehensive investigation into donor activity is published,6 this
chapter merely captures some of the main debating points that have arisen
in both popular and behind-the-scenes analysis. Three key issues that
emerge from even an initial review of the aid industry include aid as a tool
of foreign policy leverage, the appropriateness of hard-currency loans for
development and the uneven impact of donor aid on civil society. I will
consider each below.
Policy destabilisation
The degree to which aid influences policy in South Africa is hotly debated.
The influential advisory role of the World Bank, often through ‘donor co-
ordination’ projects, has tended to reinforce the perception that aid is
tightly bound up with the broader neo-liberal agenda of shrinking the state.
Although virtually no loans were requested by South Africa, there have
been many other means of World Bank policy persuasion, including ‘just-
in-time policy availability’, training sessions and strategic visits by South
Africans to World Bank headquarters. World Bank teams have successfully
introduced neo-liberal policy advice in areas such as macroeconomic policy,
the basic housing and infrastructure programme, land reform, national
water pricing, welfare-programme cuts and the like. In even a policy matter
as obscure (yet as vital) as bulk-water pricing, the World Bank describes its
advisory role as ‘instrumental’.9
Yet while there is usually some motivation by donors to induce policy
changes, this is not always successful. Foreign aid ‘has had no net effect on
the recipients’ growth rate or the quality of their economic policies’,
according to World Bank aid researchers David Dollar and Craig Burnside,
in a study of post-1970 donations that attempts to shift blame for ineffec-
tual neo-liberalism to aid recipients: ‘We got into thinking we could induce
countries to reform. But it turns out this was wrong.’10 The occasional unre-
liability of foreign aid as policy leverage is reflected in the case of Taiwanese
donations to South Africa. In 1994, these were apparently aimed initially at
currying political favour with the ANC – a donation of $10 million to the
party prior to the first election was cited as one basis for retaining official
SA recognition of Taiwan instead of the People’s Republic of China (PRC)11
– and later at influencing government policy for the same reason by the
supply or withholding of development aid. Thus, when in 1996 South
Africa reversed its position by recognising the PRC, the furious Taiwanese
foreign minister, John Chang, suspended grants to South Africa worth $80
million and loans worth $50 million.
Chapter 4 7/22/03 6:39 pm Page 83
Debate has also raged over the European Union’s interests in South
Africa, particularly in relation to the EU-SA free-trade agreement in March
1999, to which continued grant aid is integrally tied. The 12-year deal
allows South Africa slightly more time than EU firms for adaptation to
declining import protection. But extremely severe competition from
European imports is anticipated in sectors as diverse as clothing and auto-
mobiles. The free-trade agreement was controversial in part because at the
last moment, in April 1999, Germany and Holland requested a brand new
and seemingly unrelated repatriation clause for illegal aliens from South
Africa, and because southern European countries demanded greater agri-
cultural protection, particularly against SA use of traditional brand names
of alcohol.12
US strings attached
Tied service contracts represent a highly visible way in which foreign aid
supports donor constituencies. These are not unlike the tied commodity-
import programmes that are popular amongst aid agencies so as to assure
donor-country sales of farm and related equipment to aid recipients. Even
conservative commentator Simon Barber of Business Day newspaper
alleged that Clinton’s $600 million aid package to South Africa for 1994–6
was a ‘sleight of hand’, because $72 million were for US export promotion
and at least $75 million were not in grants, but rather loan guarantees on
housing loans.13 US donor programmes came under further suspicion as
Republican Party pressure emerged in 1995 to cut the US government aid
budget, for defenders argued that they benefitted Americans as much as
South Africans.
As Andrew Young, former US representative to the United Nations,
noted when organising his ‘Constituency for Africa’ against the 1995
Republican Party threat to cut aid, ‘We get a five to one return on invest-
ment in Africa, through our trade, investment, finance and aid. Don’t you
see, we’re not aiding Africa by sending them aid, Africa’s aiding us.’ At the
same Constituency for Africa meeting, Washington-based aid consultant
Joseph Szlavik warned African aid recipients: ‘Pay more attention to their
voting in the United Nations, trying to meet the US position more often
than they currently do. By moving forward, African countries will be able
to “win friends and influence people” as the saying goes.’14
Most evidently, this was the case when in early 1997 President Clinton
threatened to withdraw aid shortly after the South African cabinet
approved arms sales to Syria in December 1996, which the US considers a
terrorist state. According to one press report, ‘In the toughest public warn-
ing it has ever issued to President Nelson Mandela’s government, the
Clinton administration said yesterday it was “deeply concerned” by cabi-
net’s provisional approval of a R3bn arms sale (aim-enhancing gear for
Chapter 4 7/22/03 6:39 pm Page 84
Programme, ‘The RDP must use foreign debt financing only for those
elements of the programme that can potentially increase our capacity for
foreign earnings.’23 As the SA National Civic Organisation explained in
1994 in its report, Making People-Driven Development Work,
The reason for the hard line on foreign borrowing is three-fold. First, South
Africa is awash with capital, and at least in the short term does not need to
borrow abroad. Second, and more important, is the much reported foreign
debt trap. Foreign loans are denominated in foreign currency – dollars, yen,
ecu, etc. During the coming years, the Rand will continue to devalue against
those currencies, so that even if the interest rate is very low in dollar terms
the effective cost in Rand may be much higher. This, in turn, is cyclic – if
foreign borrowing is high then international financial institutions such as the
IMF push for further devaluation, which further increases the Rand repay-
ments. Thus, the more foreign debt South Africa takes, the more onerous
become the repayment conditions. Many countries – including industrialis-
ing ones like South Africa – have been caught in this trap and found that
supposedly soft loans became a millstone around their neck. Third, no
foreign loan is truly unconditional – there are always restrictions on the use
of the loan or on government economic policy, and these impose a substan-
tial hidden cost (pp. 60–1).
Mixed signals
The RDP foreign-loan provision was widely accepted, even in the business
press.24 Thus in 1998, South Africa turned down $75 million worth of
Japanese loans for KwaZulu-Natal bulk-water development and the
upgrading of Eastern Cape rural roads because, as one report noted, ‘the
requirement to provide only yen-denominated loans was making Japanese
loans only marginally cheaper. This signals an increasingly cautious
approach to foreign aid by government.’ The Department of Finance itself
explained, ‘Due to exchange rate risks, and increased costs associated with
taking out forward cover, the landed cost of the loans is only marginally
cheaper than loan facilities on the local market.’25
However, foreign development lending still continues, particularly to
South Africa’s major foreign parastatal borrowers, such as the Development
Bank of Southern Africa. With the currency suffering periodic declines,
including two bouts of 30% nominal devaluation over a few weeks in early
1996 and mid-1998, as well as a 25% drop during 2000, repaying such loans
in cases where there are no offsetting hard-currency income sources is
bound to be prohibitively expensive. For many years, South Africa avoided
a World Bank loan estimated in the range of $750 million for basic infra-
structure. As Kgalema Motlanthe put it, ‘Once you start taking loans from
the World Bank and IMF, they can tell you even who your finance minister
Chapter 4 7/22/03 6:39 pm Page 86
The South African government promised to fund the NDA to the tune
of R50 million in its first year of operation, R165 million in the second year
and R265 million in the third, which represents an increased commitment.
This is nevertheless still well short of the amount required to provide
adequate support to the sector. The Independent Development Trust’s
promised contribution of R100 million was well short of the support it
could provide, given its reserves in excess of R1 billion. There were inter-
minable delays experienced in the Department of Trade and Industry in
disbursal of lottery monies to NGOs and charities. The EU, as the only
major contributor to the TNDT aside from government, played an impor-
tant role, yet the contribution of R70 million during the late 1990s
represents an average of a mere R15 million a year. A further EU promise
of 30 million euros over three years represents a declining ratio of EU
funding compared to government funding.29
Moreover, debate has raged over which sectors should be funded and
which shouldn’t. In 1997, for example, the Nedlac Community
Constituency attacked the NDA Advisory Committee’s Final Report: ‘It
fails to recognise the potential problems and pitfalls of a body which
engages in both funding and determining development policy, that is, deter-
mining what is to be funded. It is inadvertently assigning a gatekeeper role
to the organisation.’ Sangoco, in a report on the proposed funder, added:
‘The principal role of the NDA should be that of being a conduit for devel-
opment grant finance to NGOs and CBOs, who should be the implement-
ing agents of development projects and the recipient beneficiaries of grant
funds.’30
5. Attributing blame
Are the complaints about foreign development aid recorded above
convincing? They must be tempered by the South African government’s
own enormous shortcomings in managing aid. The ANC had, after all,
promised to ‘introduce measures to ensure that foreign governmental and
non-governmental aid supports the RDP’,31 but, in fact, failed to do so, in
part because its own policies often directly violated the RDP.32
To some extent, contradictory policies, weak programmes and
unsustainable projects were major factors in the failure of foreign-funded
development. Financial sustainability was a perennial problem, for typically
once capital spending has generated some form of physical infrastructure,
donors have achieved what they want and move on to the next project,
without sufficient concern about the recipients’ ability to afford the recur-
rent operating and maintenance costs of the project. This was remarked
upon by finance minister Chris Liebenberg: ‘Donors often insist that aid is
used to build something like a hospital or township but forget that the
government is left to put in the infrastructure and maintenance which puts
Chapter 4 7/22/03 6:39 pm Page 88
to serve the needs of the citizenry. As we will see in Part two, there are many
reasons to question whether meeting the needs of the citizenry is indeed the
agenda of the South African government, in the context of worsening
global apartheid.
Notes
1 Financial Times, 11 November 1998.
2 Business Day, 14 January 1995.
3 Commitments failed to translate into disbursements and implementation for several
reasons: an overly bureaucratic RDP Office (which initially funded aid-related
projects on a reimbursement basis, not up-front, and had excessively complex
requirements for project business plans); a requirement to direct funding through
the general revenue fund; parliamentary oversight; project tendering requirements;
the imposition of VAT on aid; complex donor procedures; conflicts with govern-
ment; and an increasingly demobilised civil society. See Bratton, M. and Landsberg,
C. (1998), ‘Trends in Aid to South Africa’, Indicator SA, 15(4).
4 Montes, C., Migliorisi, S. and Wolfe, T. (1999), ‘Evaluation of EC Country Strategy:
South Africa, 1996–99’, Paris, Investment Development Consultancy and Rome,
Development Strategy, p. v.
5 See, for example, Bratton, M. and Landsberg, C. (1998), ‘From Promise to Delivery:
Official Development Assistance to South Africa, 1994–98’, Johannesburg, Centre
for Policy Studies; Budlender, D. (1999), ‘Donor Funding Poses Questions for
South Africa’, Budget Watch, IDASA Budget Information Service, August;
Budlender, D. and Dube, N. (1999), ‘Gender and Official Development Assistance
in South Africa’, in D. Budlender (ed.), The Fourth Women’s Budget, Cape Town,
IDASA; Heard, J. (1999), ‘Foreign Aid, Democratisation and Civil Society in
Southern Africa: A Study of South Africa, Ghana and Uganda’, IDS Discussion Paper
368; and Love, R. (1999), ‘Changing Aid Patterns in Southern Africa’, Development
in Practice, 9(3).
6 Such research is under way in the Department of Finance and the University of
Natal-Durban’s Centre for Social and Development Studies. A good model is the
study of Lesotho aid by James Ferguson (1994), The Anti-Politics Machine,
Minneapolis, University of Minnesota Press.
7 Sogge, D. (1998), ‘Misgivings: Aid to Africa’, Indicator SA, 15(4). See also Sogge, D.
(ed.) (1996), Compassion and Calculation: The Politics of Private Foreign Aid,
London, Pluto Press.
8 SAPA, 19 January 1995.
9 For an accounting of such influence from within, see the World Bank (1999), South
Africa Country Assistance Strategy, Washington, DC; for a more critical account, see
Chapter three, above, and Bond, P. (2000), Elite Transition: From Apartheid to
Neoliberalism in South Africa, London, Pluto Press and Pietermaritzburg, University
of Natal Press, Chapter 5.
10 Financial Times, 14 April 1997. See these authors’ 1997 summary, ‘Aid Spurs Growth
– In a Sound Policy Environment’, Finance and Development, 34(4) and their 1998
book, Assessing Aid: What Works, What Doesn’t and Why, Washington, DC, World
Bank.
11 Tony Leon, leader of the opposition Democratic Party, concluded, ‘Our whole
foreign policy is based on the electoral debts of the ANC. When the ANC is short
of cash it runs off to the Gulf states or to Morocco for help.’ (Mail and Guardian,
8 December 1995.)
Chapter 4 7/22/03 6:39 pm Page 90
12 Just as importantly, the deal has been criticised by regional policy-makers for lack of
transparency and for its potentially devastating impact on (non-SA) regional
manufacturing firms (in view of far more competitive European firms using SA as a
trading base to penetrate into the region). Zimbabwe and Zambia even imposed new
protectionist barriers against SA imports, in the wake of 40% of Zimbabwe’s manu-
facturing output disappearing between 1991 and 1995, and 75% of Zambia’s
formal-sector jobs evaporating during the same period.
13 Business Day, 24 May 1994.
14 Bond, P. (1995), ‘A Five to One Return’, African Agenda, 1(2), March.
15 Business Day, 16 January 1997.
16 The Star, 19 March 1997.
17 Bond, P. (1999), ‘Globalization, Pharmaceutical Pricing and South African Health
Policy: Managing Confrontation with US Firms and Politicians’, International
Journal of Health Policy, 29(4).
18 Business Day, 20 July 1998.
19 Business Day, 16 December 1997.
20 Business Day, 16 March 1998.
21 Business Day, 19 February 1998.
22 Business Day, 19 February 1998.
23 African National Congress (1994), Reconstruction and Development Programme,
Johannesburg, Umanyano Publications, sec. 6.5.16.
24 See the discussion in Bond, P. (2000), Elite Transition, pp. 174–5.
25 Business Day, 2 March 1998.
26 Business Day, 6 June 2000.
27 Submission of the South African NGO Coalition to the Advisory Committee
Investigating the Feasibility of the Establishment of a National Development
Agency, undated.
28 Sunday Independent Reconstruct, 21 May 2000.
29 Concerns were articulated, off the record, that the EU insisted on micromanaging
TNDT development priorities, as a result of a regular insistence on its right to give
the go-ahead on individual projects to be funded from the EU contribution to the
TNDT.
30 The Star, 11 July 2000.
31 African National Congress, op. cit., sec. 6.5.16.
32 Bond, P. and Khosa, M. (1999), An RDP Policy Audit, Pretoria, Human Sciences
Research Council.
33 Mail and Guardian, 21 July 1995.
34 European Union South Africa Mission (1999), South Africa Country Review,
Pretoria.
35 Ibid.
36 Kapijimpanga, O. (2001), ‘An Aid/Debt Trade-Off the Best Option’, in G. Ostravik
(ed.), The Reality of Aid Reality Check 2001, Oslo, Norwegian Peoples Aid.
Part 2 7/22/03 6:44 pm Page 91
PA R T TWO
CHAPTER FIVE
1. Introduction
South Africa has been contesting the terrain of international economics
with increasing vigour since the late 1990s. In Part one, I examined that
terrain using a simplistic dichotomy as our conceptual map, i.e. struggles
between those promoting what we can call ‘global apartheid’, and those
fighting for social justice. But by the turn of the 21st century, a more accu-
rate reading of the balance of forces required examination of at least five
major currents of argumentation and activism. From those currents follow
different analyses, strategies, tactics and alliances.
What forces have been working on the fragile architecture of the inter-
national financial system, and what is the likelihood of their success in
achieving their aims? By examining both ideological and material positions
related to crisis management, we can identify three of these five tendencies,
all located in Washington, which aim to bolster the architecture in the
interests of the North (see Section 2). In contrast, two other tendencies are
much more critical of the status quo, even though they differ about ‘fixing’
or ‘nixing’ the international financial, investment and trade system (see
Section 3). The five positions, from left to right on the political spectrum,
can be labelled as follows:
1) ‘Global justice movements’;
2) ‘Third World nationalism’;
3) the ‘Post-Washington Consensus’;
4) the ‘Washington Consensus’; and
5) the ‘Resurgent right wing’ (see Table 3).1
94
7/22/03
Global justice Third World Post-Washington Washington Resurgent
E LITE
movements nationalism Consensus Consensus right wing
6:43 pm
CONTESTATION OF GLOBAL GOVERNANCE
Main Against Join the Reform Slightly adjust Restore US
argument globalisation system, but on ‘imperfect the status quo isolationism;
of capital much fairer markets’; (transparency, punish banks’
Page 94
(not people), for terms achieve supervision and mistakes
‘people-centred ‘sustainable regulation)
development’ development’
7/22/03
tanks; Russia, German Foundation
academic Venezuela, governments;
settings; [many Zimbabwe); [SA [SA government?]
6:43 pm
SA groups] government?]
Key Amin, Bello, Aristide, Castro, Annan, Jospin, Baker?, Blair, Buchanan,
Page 95
proponents Bendana, Chavez, Lafontaine?, Brown, Bush?, Bush?, Haider,
Bordieu, Bove, Mahathir, Krugman, Camdessus, Helms, Le Pen,
Brutus, Mbeki?, Sachs, Soros, Clinton, Lindsay?, Lott,
Chalmers, Mugabe, Stiglitz Fischer, Kissinger,
Chomsky, Obasanjo, Putin Greenspan, Meltzer?,
T HE
Danaher, Koehler, Moore, Shultz
95
Chapter 5 7/22/03 6:43 pm Page 96
handle on those positions is crucial, to set the stage for strategic considera-
tions of the elite-reform gambit of South African government leaders, as I
will discuss in the two subsequent chapters.
from Paris – at least, away from Lionel Jospin’s wing of socialism – and
towards London, and hence Washington. At the same time, Tokyo, led by
Miyazawa, was prevented from establishing the Asian Monetary Fund it
wanted during the late 1990s because of Rubin/Summers vetoes.15 Whether
Japan and Europe would rise again to challenge Washington probably
depended mostly upon whether a US-led global recession would change the
balance of forces and reduce dependence upon Washington’s economic
dictates.
All of the forces and ideologies cited above were, however, fundamen-
tally guided by an acceptance of Western consumption norms and habits, a
hostility (sometimes verging on the lunatic) to socialist values and a
tendency to paint economics in the narrowest and most technical terms. So
any rearrangement of personnel by the Bush administration or potential
minor reforms – even slight downsizing – of the Washington institutions
would not make much difference. The pro-status-quo forces had no plan to
restore either international financial stability or Third World prospects for
capital accumulation envisaged at the original Bretton Woods conference in
1944.
Meanwhile, the US economy continued to suffer unprecedented trade
and debt imbalances, unprecedented consumer and corporate borrowing,
and persistent stock-market overvaluation (on the NY Stock Exchange, if
not Nasdaq, which crashed violently from March 2000). Japan’s apparent
break from its decade-long stagnation in early 1999 was brief, with a down-
turn soon returning. The rapid recovery of the East Asian countries from
system-threatening crisis contributed yet further to the more durable trade
and investment imbalances, with no sign of the more balanced character of
capital accumulation so desperately required. Were there, in this dangerous
context, any feasible systematic reforms worth promoting by intelligent
progressives, or would the powers-that-be in Washington and other finan-
cial capitals necessarily drive the financial system off the economic cliff
early in the 21st century?
more difficult technical exercise, yet was accomplished with few problems
because there was sufficient political will. (It is, however, widely recognised
that a Tobin Tax is simply defensive, and that other investment measures
are needed to assure a more appropriate flow of finance to areas of poten-
tial economic – not merely speculative – return.)
Similarly, other proposals for international financial regulation, ideally
co-ordinated by a United Nations system agency, have gone unheeded. Sir
John Eatwell and Lance Taylor advocated the establishment of a World
Financial Authority.22 The ‘post-Keynesian’ economist Paul Davidson pro-
posed an international clearing union providing for capital controls.23 The
leading UNCTAD economist, Yilmaz Akyuz, made similar calls.24 Other
far-sighted US economists – Jane D’Arista, James Galbraith, William Darity
and Dean Baker of the Financial Markets Center in Washington – suggest-
ed a new international public bank and regulatory framework.25
In addition, in view not only of further currency crashes that compel
interest-rate increases that in turn bankrupt many local borrowers, but also
of a legitimate fear of continuing sovereign defaults (like Russia’s of August
1998, as well as South Africa’s standstill of September 1985 and Brazil’s of
1987), UNCTAD suggested extending some form of national bankruptcy
procedure (along the lines of the US Bankruptcy Code, Chapters 9 and 11)
on the international level.26 Fears remained, however, that if a bankruptcy
arbitration panel is influenced by the IMF, serious conflicts of interest
would arise, given that the IMF itself is typically a central creditor in all
such cases. And the question of whether the UN system could generate
such a panel cannot be answered in the affirmative unless there is a
dramatic shift in power balances and an increase in political will.
Reflecting the concern among at least a few left-leaning Northern parlia-
mentarians that existing financial regulatory measures at the national and
international levels are insufficient, a motion tabled in the German
Bundestag in May 1999 by the Party of Democratic Socialism called upon
the government to take measures that included the following:
borrowed rather than own funds, it may be assumed that these credits
– especially to hedge and investment funds – are used primarily for
short-term financial speculation. The banks will pass on the costs of
holding the reserves to borrowers, thereby pushing up the price of the
financial commitment and reducing the investment;
imposing a charge on non-interest-bearing or low-interest cash
deposits when importing or exporting capital, thus adding more to the
cost of such transactions than the percentage levied by a Tobin Tax. A
sliding scale of charges may be imposed in line with the type and/or the
term of capital flows: high rates would apply to short-term, high-risk
accounts, while low rates would be charged on long-term, lower-risk
investments.
Not only did social movements show that in some settings they could
move from marginal sideline protest to shake ruling-class confidence in
major neo-liberal initiatives, e.g. the North American Free Trade
Agreement and US support for the General Agreement on Tariffs and
Trade were threatened more by radical US farmer and labour activists than
by the Republican right-populists. They also claimed quite substantial
resources for future struggles, including effective advocacy networks44 and
a few progressive nerve centres in sites of power, particularly Washington,
DC.45 There were, in addition, several radical economic think-tanks
associated with the social movements,46 university allies,47 and a handful of
accessible international activist-oriented periodicals48 and publishing
houses,49 not to mention world-class spokespeople and luminaries from the
new movements who easily outwit conservative debating opponents.50
However, the global balance of forces is very clearly weighted against
Third World nationalists and the global justice movements, and there
appears little real basis for any forms of alliance between the two, given the
former’s penchant for authoritarianism and patriarchy. There is also a
variety of other important, organised social forces such as Muslim funda-
mentalist oppositionists, Andean guerrillas or still-stodgy US trade union-
ists51 that don’t fit neatly into any camp as yet, but which may influence
matters to some degree.
4. Alliances falter
Between the full-blown emergence of the international financial crisis
around mid-1997 (although the full extent of contagion was only felt a year
later) and the onset of a US recession in early 2001, roughly 40 months
transpired of give-and-take, mass protests, negotiating sessions and produc-
tion of reams of paper (and even more kilobytes of cyberspace argument),
all devoted to making the case that only one camp had it right. Although a
few momentary initiatives were made to explore alliances – or at least non-
aggression pacts – these petered out, and the five competing blocks grew
more divided than ever.
Not that there weren’t interesting possibilities for co-operation between
the camps, and, as we shall see in Chapters ten and eleven, perpetual
internecine conflict amongst organisations representing the oppressed. But
the opportunities for truly uniting forces were few and far between, and the
best that various groups could hope for was a temporary non-aggression
pact here or there.52
Other alliances?
Meanwhile, the conservative members of the US Congress and right-wing
populists everywhere enviously realised that when it came to mass mobili-
sation around international financial and trade matters, the Right had
nothing like the capacity shown by the Left in Seattle, Washington and
Prague. One deal that brought the protesters’ Washington technocrats
together with creative Republicans was a successful effort in October 2000
Chapter 5 7/22/03 6:43 pm Page 109
to prevent the World Bank and IMF from imposing user fees on healthcare
and education in future loan conditions.
The global justice movements did earn occasional acknowledgement
from the elite. On the verge of leaving the World Bank in early April 2000,
Stiglitz praised the street protesters. But that too was a stillborn friendship,
as Stiglitz was quickly sucked into an elite-intellectual exercise on ‘the
alternative’ (funded, predictably, by Ford) at Brookings, Stanford and
Ottawa’s North-South Institute, which didn’t give the global justice move-
ments a second thought. But likewise, few on the Left saw Stiglitz’s
contorted rebuilding of neo-classical economics through ‘information-
theoretic’ augmentations as a worthwhile exercise, when their champion
was so obviously now out of the power loop.
Some leftists tried reaching out a bit to the nationalists, with Noam
Chomsky praising the Havana Summit,56 and internationalist activists –
from Global Exchange, Ruckus Society and other groups, organised by a
small group with excellent e-mail contacts, United Peoples – concluding in
mid-2000 that alliances with Southern rulers are possible: ‘With regard to
the fundamental debt cancellation and fair trade issues, the G77 summit in
Havana once again confirmed the accordance between the views of the G77
and the new worldwide anti-globalization movement that protested
WTO/IMF/World Bank in Seattle and Washington. A cooperation
between the two parties therefore would seem appropriate in order to
achieve our common goals in the most efficient and speedy way.’57
Again, this came to nothing as nationalists looked for relief instead to
sites of power, not to disruptive left-wing groups with which they too
experienced regular friction. Some Third Worldists were heartened by
grudging elite acknowledgements in September 1999, led by Stiglitz but
joined too by IMF researchers, that the previous year’s Malaysian currency
controls were effective medicine. But efforts by Mahathir to gather like-
minded world leaders both at home and, by invitation of Mugabe, at
Zimbabwe’s Victoria Falls, had no apparent success in expanding the
nationalist current. (South Africa, for example, was distinctly uninterested
in nationalist-type financial boat-rocking.)
And looming still, as potentially a denouement to financial power – and in
turn as the creator of space required to re-establish national economic sover-
eignty – was the likelihood of a further financial ‘correction’. The next time,
all observers either feared (or hoped), the epicentre would be the US, whose
capacity to suck in foreign goods on credit gave the appearance of superficial
glitter, while economic fundamentals were in fact rotting underneath. As I
discussed in Chapter one, that country’s trade deficit, foreign debt, domestic
corporate and consumer debt, and asset inflation all stood at unprecedented
levels at the turn of the century. The buildup of financial stresses in the
global economy – and the balance of forces that accommodated these
Chapter 5 7/22/03 6:43 pm Page 110
Notes
1 In an important overview of the debate over global financial reform, Walden Bello,
Kamal Malhotra, Nicola Bullard and Marco Mezzera argue (in ‘Notes on the
Ascendancy and Regulation of Speculative Capital,’ paper presented to the confer-
ence on ‘Economic Sovereignty in a Globalized World’, Bangkok, 24 March 1999)
that there are three tendencies of global financial reform: ‘It’s the wiring, not the
architecture’ (the Washington Consensus plus Group of 22); ‘Back to Bretton
Woods’ (a strong version of the Post-Washington Consensus); and ‘It’s the develop-
ment model, stupid!’ (global justice movements) – ignoring the resurgent US right-
wing critique, and also collapsing nationalists and Post-Washington Consensus
economists into the second category.
2 The term ‘Washington Consensus’ comes from John Williamson (1990), ‘The
Progress of Policy Reform in Latin America’, Policy Analyses in International
Economics, Washington, DC, Institute for International Economics. As one minor
personal indication of the awesome power invested in Washington Consensus
leaders, Time magazine (15 February 1999) anointed Rubin, Summers and
Greenspan the ‘Three Marketeers’ who could save the world from depression.
The arrogance of Consensus-think was evident in Camdessus’ description of the
Asian crisis as a ‘blessing in disguise’ (Wall Street Journal, 24 September 1998).
Illustrative of crisis-era justifications are articles and speeches by Robert Rubin (1998),
‘Strengthening the Architecture of the International Financial System’, remarks to the
Brookings Institution, Washington, DC, 14 April; by Laurence Summers (1998), ‘The
Global Economic Situation and What it Means for the United States’, remarks to the
National Governors’ Association, Milwaukee, Wisconsin, 4 August; by Stanley
Fischer (1997), ‘IMF – The Right Stuff’, Financial Times, 17 December; (1998), ‘In
Defence of the IMF: Specialized Tools for a Specialized Task’, Foreign Affairs, July-
August, and (1999), ‘On the Need for an International Lender of Last Resort’, IMF
mimeo, Washington, DC, 3 January; and by Michel Camdessus (1998), ‘The IMF and
its Programs in Asia’, remarks to the Council on Foreign Relations, New York,
6 February. See also the Organisation for Economic Cooperation and Development
(1998), Report of the Working Group on International Financial Crises, Paris.
It is tempting to place South Africa’s government in the Washington Consensus
grouping, given the evidence of how much elites like Mbeki, Manuel and Erwin
celebrated their homegrown adoption of Washington-friendly austerity policies. But
this would be to jump ahead of evidence to the contrary, as I will discuss below.
3 Wolfensohn, J. (1999), ‘A Proposal for a Comprehensive Development Framework
(A Discussion Draft)’, Washington, DC, World Bank, 29 January.
4 Dornbush, cited in Doug Henwood (1999), ‘Marxing up the Millennium’, paper
presented to the ‘Marx at the Millennium’ conference, University of Florida,
19 March.
5 For a good description, see Leaver, R. (1999), ‘Moral (and Other) Hazards: The IMF
and the Systematic Asian Crisis’, paper presented to the conference on ‘Economic
Sovereignty in a Globalizing World’, Bangkok, 24 March. For their own words, see
Cato Institute, http://www.cato.org/research/glob-st.html; Henry Kissinger (1998),
‘IMF no Longer Able to Deal with Economic Crises’, Los Angeles Times, 4 October;
Chapter 5 7/22/03 6:43 pm Page 111
Shultz, G., Simon, W. and Wriston, W. (1998), ‘Who Needs the IMF?’, Wall Street
Journal, 3 February.
6 Yonan, A. (2000), ‘Bush seen Pushing IMF toward less Interventionist Role’, Dow
Jones newswires, December 20.
7 Wall Street Journal, 20 March 2000.
8 Franke-Ruta, G. (1998), ‘The IMF Gets a Left and a Right’, The National Journal,
30(3).
9 Stiglitz, J. (1998), ‘More Instruments and Broader Goals: Moving Toward a Post-
Washington Consensus’, WIDER Annual Lecture, Helsinki, 7 January.
10 In a perceptive review of the 1998 book, Doug Henwood (‘Let George Do It’, Left
Business Observer, 88, February 1999) argues that Soros has lifted unattributed
arguments about financial-market disequilibrium (‘nonergodicity’) from Paul
Davidson, the post-Keynesian economist, and that his analysis is far less convincing
in these matters than Keynes, Joan Robinson, Karl Polanyi and Hyman Minsky, who
pioneered theories of imperfect financial markets long before Stiglitz. (Stiglitz told
me personally that he did not take Soros’ ideas terribly seriously, for he saw Soros
mainly as a practitioner with insufficient intellectual distance; interview, 1 October
1998, Ottawa.)
Most tellingly, Soros’ solutions wilt when it comes to national exchange controls,
at a time when honest economists were reviewing this once widely practiced tech-
nique as part of the solution to financial market turbulence – and at a time when
Stiglitz, who initially worried that the Malaysian exchange controls of September
1998 represented ‘too much of a backlash’, prepared to endorse Malaysia’s controls.
(He told me three weeks later that he preferred dual-currency controls like South
Africa’s finrand of 1985–95.) After all, Stiglitz conceded in mid-1999, ‘There was no
adverse effect on direct foreign investment … there may even have been a slight
upsurge at some point’ (Agence France-Presse, 23 June 1999). Soros, whose famous
tiff with an evidently anti-semitic Mohamad bin Mahathir in 1997–8 may have in-
fluenced matters (Economist, 27 September 1997), shied well away from exchange
controls, for if widespread, these would end his speculating days. And as Henwood
(op. cit.) concludes of Soros’ insurance proposal, ‘Making creditors bear the risk of
lending beyond sanctioned limits might not do all that much’ to cool down hot
money flows in any event.
11 Krugman, P. (1998), ‘Saving Asia: It’s Time to get RADICAL’, Fortune, 7 September.
12 Sachs, J. (1997), ‘The IMF is a Power unto Itself’, Financial Times, 11 December;
(1998), ‘The IMF and the Asian Flu’, The American Prospect, March-April.
13 With its own occasional Post-Washington Consensus rhetoric, South Africa, too,
watched and waited, as I will show in the next two chapters. Sweden and Chile were
meant to be new-and-improved social-democratic allies, though there was little real
evidence of any practical application of such a grouping.
14 Lafontaine was also Old Left, and possibly belongs not in the Post-Washington cate-
gory, but rather amongst global justice movements, in part because a key advisor was
the Berlin Free University’s famous Marxist economist, Elmar Altvater. See
Lafontaine O. and Mueller, C. (1998), Keine Angst vor der Globalisierung: Wohl-
stand und Arbeit für Alle, Bonn, Dietz Verlag.
15 Hitoshi, H. (1999), ‘The Asian Monetary Fund and the Miyazawa Initiative’, paper
presented to the conference on ‘Economic Sovereignty in a Globalizing World’,
Bangkok, 24 March.
16 Reuters, 2 January 2001.
17 See D. Moggeridge (ed.), The Collected Works of J. M. Keynes, vol. 25, London,
Macmillan, p. 149.
Chapter 5 7/22/03 6:43 pm Page 112
18 Tobin, J. (1978), ‘A Proposal for International Monetary Reform’, The Eastern Eco-
nomic Journal, 4, July/October; Eichengreen, B., Tobin J. and Wyplosz, C. (1995),
‘Two Cases for Sand in the Wheels of International Finance’, Economic Journal, 105;
and Tobin, J. (1996) in M. ul Haq, I. Kaul and I. Grunberg (eds), The Tobin Tax:
Coping with Financial Volatility, New York, Oxford University Press. See also Felix,
D. (1995), ‘Financial Globalization vs. Free Trade: The Case for the Tobin Tax’,
Geneva, United Nations Conference on Trade and Development discussion paper
no. 108.
19 Henderson, H. (1996), Building a Win-Win World, San Francisco, Berrett-Koehler.
20 In 1990, the Bank for International Settlements Committee on Interbank Netting
Schemes of the Central Banks of the Group of Ten Countries agreed on the
‘Lamfalussy Minimum Standards’ for regulation of such flows, for example, by
taxing transactions that are registered through the Society for Worldwide
Interbank Financial Telecommunications (SWIFT, the primary commercial bank
clearing mechanism), which now incorporates netting done through the Exchange
Clearing House Organization and Multinet International Bank. See Bank for
International Settlements (1990), The Lamfalussy Report: Report of the Committee
on Interbank Netting Schemes of the Central Banks of the Group of Ten Countries,
Basle.
21 Garber, P. and Taylor, M. (1995), ‘Sand in the Wheels of Foreign Exchange Markets:
A Sceptical Note’, The Economic Journal, 105; Garber, P. (1998), ‘Derivatives in
International Capital Flow’, National Bureau of Economic Research working paper
no. 6623, New York.
22 Eatwell, J. and Taylor, L. (1998), ‘International Capital Markets and the Future of
Economic Policy’, CEPA Working Paper Series III, working paper no. 9, New School
for Social Research, New York, September.
23 Davidson, P. (1997), ‘Are Grains of Sand in the Wheels of International Finance
Sufficient to do the Job when Boulders are often Required?’ The Economic Journal,
107, and (1998), ‘The Case for Regulating International Capital Flows’, paper
presented at the Social Market Foundation Seminar on Regulation of Capital
Movements, 17 November.
24 Akyuz, Y. (1995), ‘Taming International Finance,’ in J. Michie and J. G. Smith (eds),
Managing the Global Economy, Oxford, Oxford University Press, and (1998), ‘The
East Asian Financial Crisis: Back to the Future’, in K. S. Jomo (ed.), Tigers in
Trouble, London, Zed.
25 See http://www.fmcenter.org.
26 Instead of shutting down municipalities and companies or bankrupting consumers
who have liquidity problems, such procedures attempt to resolve the problems
through restructuring. This makes them relevant to foreign debt negotiations. In its
1998 Trade and Development Report, UNCTAD proposed the establishment of an
independent panel to determine when a country under attack by speculators can be
permitted to impose exchange or capital controls (including debt standstills), consis-
tent with the IMF’s Article VIII, section 2(b).
27 PDS Parliamentary Group (1999), ‘A social and democratic world economic system
in place of neo-liberal globalization’, printed paper 14/954, German Bundestag,
Bonn, 4 May.
28 For details, see Anderson, S., Cavanagh, J. and Lee, T. (1999), Field Guide to the
World Economy, New York, The Free Press.
29 Summers, L. (1989), ‘When Financial Markets Work Too Well: A Cautious Case for
a Securities Transactions Tax’, Journal of Financial Services, 3.
30 Fischer, S. (1991), Issues in International Economic Integration, Bangkok, p. 20.
Chapter 5 7/22/03 6:43 pm Page 113
CHAPTER SIX
1. Introduction
In The Wretched of the Earth, Frantz Fanon concluded, ‘For my part, the
deeper I enter into the culture and political circles the surer I am that the
great danger that threatens Africa is the absence of ideology.’1 So the ques-
tion to be asked is surely, Is there a coherent explanation and ideological
posture in relation to globalisation – indeed to ‘global apartheid’ – to be
found within the top echelons of the South African state and ruling party?
I pose the question because President Thabo Mbeki has made explicit
arguments to this effect. At a social-democratic youth gathering in July 2000
in Sweden, for example, he exhorted his listeners that:
Fundamental to the labour, social democratic, socialist and national libera-
tion movements from their very inception, is the adherence to the view that
the people must be their own liberators. These movements have therefore
always fought for democracy and, more than this, for the empowering of the
people to represent their own interests through their political parties and
through mass struggle … Democracy is about the exercise of political power
by the people themselves. As the organised representative of these masses,
the progressive movement cannot, on the basis that the market will decide
these issues, as [New York Times columnist Thomas] Friedman asserts,
abandon the struggle for the all-round and sustained betterment of the lives
of the people and the attainment of social justice. Accordingly, we have to
continue to treat the struggle against poverty, national and social exclusion
and marginalisation as fundamental to the objectives of socialist movement.2
Mbeki’s long-term objective in relation to globalisation may not, therefore,
appear to differ much from the project of ‘National Democratic Revolution’
established by the African National Congress at home. Yet both in South
African and on the international terrain, complexities and contradictions
quickly appear. South Africa has offered two major initiatives within the
global political-economic arena: reforming the embryonic world-state
system, and lending South African prestige and concrete assistance to
alleviating the plight of the African continent.
Chapter 6 7/22/03 6:43 pm Page 117
The first challenge, upon which all else hinges (and hence upon which
this analysis dwells at greatest length), has at least three component
strategies:
1) leading the launch of a new WTO round, in co-operation with select
semi-peripheral allies (such as Algeria, Brazil, China, Egypt, India,
Mexico, Nigeria and South Korea), to contest Northern protec-
tionism;
2) promoting the revitalisation of the IMF and World Bank by advocating
more democratic functioning (especially a higher voting share for
Africa), invoking a modified Post-Washington Consensus approach to
development, and demanding a larger volume of debt relief; and
3) rejuvenating the UN – apparently through seeking a permanent seat on
the Security Council – and associated agencies in key areas of inter-
national influence.
make sense of, and ultimately to justify, these interrelated tasks? After all,
the late 1990s witnessed a general global rethink of the neo-liberal free-
market philosophy, as a result of crises of international economic regulation
and growing global inequality. Even if it is still sometimes termed ‘social
democracy’, the modified ‘Third Way’ neo-liberalism practised by the
ruling parties of the United States from 1993 to 2000, Britain from 1997
and Germany from 1998 was virtually indistinguishable from the policies of
conservative predecessors – Reagan, Thatcher and Kohl – who launched
the global resurgence of corporate rule and attack on the social wage during
the 1980s.
Alan Zuege puts it in a way that is strikingly applicable to South Africa’s
own socio-economic strategy, which, in common with the Third Way,
seeks to adapt not just industrial and political structures, but social struc-
tures as well, to the imperative to compete and win in global markets. In
pursuit of this agenda, the so-called modernising left asks workers to trade
away what remains of their post-war entitlements of the chimerical promise
of participation in a global knowledge economy, and to buy into the new
industrial, distributional, and civic accords which purport to make it possi-
ble. But with the legacy of overaccumulation still unravelling and the ravages
of international competition unyielding, these reformist ‘bargains’ amount to
little more than a ‘negotiated’ path to austerity.3
Of course, no matter the similarity between ANC policy and this descrip-
tion, from ANC headquarters would come a robust denial that the ANC is
in lockstep with the neo-liberal economics and Third Way politics of
Clinton, Blair and Schroeder. Instead, Mbeki’s primary personal and
political-party challenge has been to ally with regimes like those in Sweden
and Chile that wear a post-neo-liberal face, and to project a new compas-
sion for marginalised people and countries that transcends the market. In
his Swedish speech, Mbeki clarified the ideological starting point of a
revived social democracy: ‘I believe that the question we should all ask
ourselves is whether it is the vox populi – the voice of the people – that is
the voice of God, or is it the voice of the market, that is the voice of God!’4
The voice of the people, or the voice of the market? Matters become infi-
nitely more nuanced once we consider not merely rhetorical claims, but
explanations and ideological underpinnings (see Section 2). To the extent
that an apolitical, technocratic reading is possible, Mbeki provides one (see
Section 3). The conclusion (Section 4) therefore enquires into aspects of
solidarity that follow from a modernisationist view of globalisation together
with a techno-economic ideology. In combination, these belie Mbeki’s talk
of ‘sustained betterment of the lives of the people and the attainment of
social justice’ – and, predictably, what we ultimately discover to be at stake
in the ideological debate over globalisation is merely vulgar self-interest.
Chapter 6 7/22/03 6:43 pm Page 119
2. Explaining globalisation
At the July 1998 Mercosur meetings of South American nations, Nelson
Mandela was heard to announce: ‘Globalization is a phenomenon that we
cannot deny. All we can do is accept it.’5 But just weeks later, the mood
within the highest circles of the ANC seemed to shift quite dramatically in
the opposite direction. (However, as I explain below, the ‘inevitability
thesis’ – and its corollary, the excuse that ‘globalisation made me do it!’ – is
still trotted out regularly when learned-helplessness posturing is required.)
Both Mbeki and then Mandela had scolded a major SA Communist
Party congress and a Cosatu executive committee in June–July of that year
for opposition to neo-liberalism. But whether because of the national elec-
tions pending in 1999 (requiring Tripartite Alliance reconciliation) or a
genuine change of heart, some flaps on the left of the broad ANC tent were
reopened within months, and communists and trade unionists streamed
back in.
Development ideology
But to gain the requisite scepticism about the durability of the ANC
leadership’s attack on the global market requires a look at the underlying
philosophy Mbeki brings to development. For in his argumentation, Mbeki
carefully avoids drawing the obvious causal linkages between growing
wealth in one part of the world and growing poverty elsewhere. (Never is
such causality debated, and only rarely is it mentioned, but an unusual
example was trade and industry minister Alec Erwin’s throwaway comment
to parliament, just prior to the WTO debacle in Seattle, that ‘the mobility
of [financial] capital acts to further set back economic growth in the devel-
oping countries’.)10
When Mbeki does invoke arguments reminiscent of so-called ‘depend-
ency theory’ – i.e. that economic integration under conditions of global
corporate and financial domination entails the development of underdevel-
opment – so as to more explicitly challenge global elites, economic variables
are quickly obscured. The modus operandi becomes, simply, helplessness, of
the kind he expressed in a speech in May 2000 to the US foreign policy
establishment at Georgetown University in Washington:
Many of our countries, including all those on our Continent, do not have and
are unlikely to have in the foreseeable future, the strength themselves to
Chapter 6 7/22/03 6:43 pm Page 121
determine on their own what should happen to their economies. The more
they get integrated into the world economy, the further will this capacity be
reduced, making them more dependent on the rest of the world economy
with regard to meeting the challenge of ending poverty within their coun-
tries.11
‘[M]ore dependent on … the world economy’ – but by definition, in
Mbeki’s post-communist, pragmatic leadership dictionary, that shouldn’t be
a bad thing, and is certainly a necessary process. Indeed, in a speech at the
White House, Mbeki warmly endorsed the amplification of US-dominated,
corporate rule: ‘We are particularly pleased that the African Growth and
Opportunity Act has been signed.’12 But, looking carefully, there is never to
be found in Mbeki’s repertoire of explanations the notion, dangerous to the
neo-liberal stance, that the gulf between rich and poor widens precisely
because Northern capital enjoys an ever-growing capacity to source inputs ever
more cheaply from the South, thanks to asymmetric trade relations, debt
peonage and currency crashes generated by regular bouts of speculative
financial raiding.
That possibility, and the policy implications it suggests, can never be
considered, much less stated, in polite discourse. On the contrary, judging
from the Georgetown speech, Mbeki appears to have backpedaled from a
University of Sussex-era interest in dependency theory to ‘modernisation-
theory’ principles, by way of the notion of development ‘take-off’ pioneered
by US imperialist planner W. W. Rostow, and long ridiculed by the Left:
‘Relative to the needs of these countries, including our own, the world
economy disposes of sufficient capital resources whose injection into our
countries as long-term investment, would succeed to take us to the “take-
off stage” once spoken of in textbooks on development economics.’13
But to take off, under current global circumstances, requires access to
new technology. And to justify the freedom given to South African busi-
nesses since 1994 to import job-killing, capital-intensive machinery in a
context in which a vast number of South Africans still lack not only gainful
employment but also access to goods to fulfil their basic needs, in turn
requires a techno-economic perspective on globalisation.
month: ‘Technology by itself, will not necessarily eradicate poverty, nor will
it end underdevelopment. Yet, the availability of technology and its dissem-
ination amongst many sectors of society, is a critically necessary condition
for economic and social development.’16
The most poignant reference to the globalisation high road Mbeki regu-
larly makes is to ‘telemedicine’ (i.e. interventions by specialists at a great
geographical distance). As he put it in a speech to a corporate San Francisco
audience, up the road from Silicon Valley, in May 2000:
Few amongst us will disagree when we assert that a global society presents
us with the opportunities to collapse both time and space, so that a village
health worker in Uganda could perform some of the most difficult medical
procedures with the assistance of a surgeon sitting in her office in San
Francisco. To be able to do this, it requires of the people in a poor country
such as Uganda to have access to education, to have access to satellite tech-
nology, and for the doctor and nurse in Uganda to be up to speed with the
latest telemedicine technology.17
Yet telemedicine also requires something else that Uganda has a very hard
time acquiring, given the fluctuating prices of its main agricultural exports
and its extreme burden of foreign-debt repayment: hard currency. This vital
barrier is obviously the main constraint behind the integration of Africa
into the New Economy, yet paradoxically it also offers neo-liberal policy
advocates a rationale – even an imperative – for intensifying further Africa’s
self-defeating, export-oriented development strategy.
To simplify this proposition, let me cite just one example of a new manufac-
turing facility that has been established in this city. I refer to a catalytic
converter plant which produces such converters which, as you know, are
used to reduce carbon dioxide emissions from motor vehicles, to promote a
better environment. Again as you know, these converters use platinum, of
which we stand out as one of the world’s largest producers. The catalytic
converter plant to which I refer, which is here in Port Elizabeth, was estab-
lished by a foreign company and is therefore part of the foreign investment
we constantly seek to attract to our country. Its establishment has made an
important contribution to the struggle we continue to wage to transform
ours into a modern manufacturing economy, with a relative reduction of our
dependence on the export of raw materials. To be economically viable, this
plant has to export a large part of its output. It must therefore respond to
the world market in a way that ensures that it is able to compete against
other plants, wherever they are located in the world, with regard to such
factors as consistency in quality, delivery on time and cost. Among other
things, the management must therefore ensure that the staff at the plant has
the necessary skills to produce the converters and meet these requirements.
To put the matter plainly, in the event that the plant experiences repeated
work stoppages so that it is unable to address these requirements, the motor
manufacturing will switch to other plants located outside our country.
Accordingly the PE plant would then have to close down, with the inevitable
job losses and our regression to the larger exports of raw platinum … The
story we have told is not a tale of fiction. It describes what we as a move-
ment, a government and a country are trying to do, and the demands
imposed on all of us by the modern, global economy.19
Water wars
Similarly, South African water has also been subject to globalisation’s
techno-economic fix, in at least two ways. British and French water priva-
tisers have been welcomed with open arms, notwithstanding convincing
documentation of consumer exploitation, worker disempowerment and
political corruption. And the World Bank has entered the debate over the
pricing of water, strongly inveighing against the free ‘lifeline’ supply
mandated in the RDP.24
Why shouldn’t water, electricity and telephones be provided by inter-
national firms? According to finance minister Trevor Manuel, after all,
‘foreign investment in state-owned enterprises allows for access to cutting-
edge technologies and increases the effectiveness with which these entities
can deliver on the rollout of essential services’.25
Yet on closer examination, the two most important pilots associated with
‘public-private partnerships’ in basic services had already proved Manuel
wrong by the end of the 1990s. The role of Suez Lyonnais des Eaux in
several Eastern Cape towns after five years left the black townships
increasingly subject not just to water cut-offs for non-payment of bills, but
even to curtailment of the ‘bucket system’ of excrement collection as well
(contrary to the firm’s promise in 1994 that it would urgently upgrade the
sanitation system from the prevailing 19th-century standards).26 The en-
during use of the bucket system gives the lie to Manuel’s belief that foreign
investment brings effective delivery of essential services.
Telephone tag
Likewise, the most important partial privatisation to date, of Telkom,
generated two scandalous dynamics that reflect the charlatan character of
Chapter 6 7/22/03 6:43 pm Page 127
such partnerships. Firstly, the Texan and Malaysian partners who in 1997
bought 30% of Telkom have not only retrenched tens of thousands of
workers (for which the state must carry the burden of associated social
costs), but have attacked the cross-subsidisation of telephone calls.
Previously, a local call received a large subsidy, paid for by long-distance
users. That cross-subsidy evaporated because it detracted from the US-
Malaysian consortium’s profitability (as do all such cross-subsidies).
Secondly, the rollout of telephone lines is thus hampered not only by un-
affordability, but by the phenomenon known as ‘churning’, i.e. in order to
prove to government it has connected sufficient lines to warrant continua-
tion of its monopoly status, Telkom simply reuses old connections, raises
its prices for local calls, cuts off customers when they can’t pay, and recon-
nects them (usually under another name), only to disconnect them all over
again. The lack of sustainability in telephone rollout, as in the cases of
water and electricity, is hence amplified by the role of the for-profit private
sector.27
It is only fair to ask whether instead of attracting elusive foreign invest-
ment, more attention should not have been given to forcing local capital into
a developmental mode (through mechanisms like prescribed asset require-
ments for institutional investors and community-reinvestment legislation
against banks). Mbeki and his team spurned such RDP mandates, in favour
of directing enormous efforts to petition foreign privatisers, whose demands
for 30–35% US-dollar-denominated rates of return on investments did not,
apparently, faze Pretoria.28 And instead of promoting developmental invest-
ment by local firms, Mbeki gave them the opposite signal, leading even
Business Day editorialists to comment ‘with alarm and despondency’ upon
the ‘flight of corporate SA abroad’. In the case of the second-largest conver-
sion of a publicly listed company (De Beers) into private hands
(Oppenheimer) in international history, which in turn denuded the
Johannesburg Stock Exchange (JSE), the conservative editorialists blamed
‘the speed with which the finance minister has approved the Anglo-
De Beers deal (what odds on De Beers relisting in some form in London in
the next two years?) and the ease with which Billiton, Old Mutual,
Dimension Data and Anglo itself have slipped their local chains …’29
and continue to have stability and are at peace with themselves, countries
that have responded positively, even under very difficult circumstances, to
the prescriptions of both the prospective investors as well as the multi-lateral
institutions. Many of these countries have created the necessary climate
conducive to investment, for example by liberalising their trade, privatising
state-owned enterprises, reforming their tax system and generally adhering
to the prescribed injunctions, all done in an attempt to attract the necessary
investments. The response from the developed countries, to these attempts
by especially many African countries to stay within the confines of the rules,
has been to treat the African continent as one country, and therefore, to
punish a country on the one end of the continent for the deeds of another
on the other end. In our own country, we have been assured that our
economic fundamentals are correct and sound. We have developed a stable
and effective financial and fiscal system. We have reduced tariffs to levels
that are comparable to the advanced industrial countries. We have reformed
agriculture to make it the least subsidised of all the major agricultural trading
nations. We have restructured our public sector through privatisation,
strategic partners and regulation. We have an equitable and sophisticated
system of labour relations that is continually adjusting to new developments.
We play an active role in all multilateral agencies in the world. Yet, the flow
of investment into South Africa has not met our expectations while the levels
of poverty and unemployment remain high.30
Likewise at Georgetown, Mbeki spoke of ‘the many heroic efforts the
governments and peoples of Africa have made and are making to correct
past wrongs, encompassing … the sustained effort in many countries to
introduce new economic and social policies consistent with many elements
of the so-called Washington Consensus’.31
Resisting change
Recognising the futility of adopting the Washington Consensus in expecta-
tion of economic rewards logically leads to two options: rethinking the
strategy (including the assessment of friends and enemies), or sinking into
a deepening malaise. Mbeki is certainly capable of a vigorous defence of
national self-interest. But as witnessed by his failure to take advantage of
successful activist pressure against transnational pharmaceutical corpora-
tions in the pricing of anti-retroviral drugs (see Chapter 9), economic
policy-makers continued the failed neo-liberal strategy.
This reflects how Mbeki’s analysis, strategy and tactics leave much to be
desired. What about alliances? Unfortunately, instead of uniting with those
who could fight international corporate power, Mbeki sought pity and a
contentless ‘solidarity’ from global elites. At even a gathering so portentous
as the G-77 ‘South Summit’ in Havana, Cuba in April 2000, Mbeki invoked
Chapter 6 7/22/03 6:43 pm Page 129
the words of none other than Michel Camdessus, the ex-managing director
of the IMF:
The global solidarity required does not simply mean offering something
superfluous; it means dealing with vested interests, certain lifestyles and
models of consumption, and the entrenched power structures in countries. I
am certain that none of us present at this Summit would gainsay the impor-
tance of the observation Mr Camdessus made, that there needs to evolve a
global solidarity that is more than just an adjunct of national policies. The
relevance of this has just been demonstrated in our region of Southern
Africa. Various countries of the North came to Mozambique to help the
government and people of that sister country to cope with a very serious
flood disaster. A week after they had arrived to demonstrate this global soli-
darity, they refused to do the most obvious thing to express solidarity with
the suffering Mozambican people, namely to cancel Mozambique’s debt.
Presumably, such a humane decision would have been inconsistent with
their national policies, to use Mr Camdessus’s expression.32
Yet here we must immediately remark upon some substantial hypocrisy.
After apartheid ended, South Africa made loans to Mozambique to resettle
disgruntled Afrikaners and to refurbish electricity-generation lines that
apartheid-backed Renamo rebels had sabotaged. These loans have not been
forgiven by the Development Bank of Southern Africa and Eskom.
Changing the world would surely, for South Africa, begin within the
region, by forthrightly addressing various Southern African dilemmas.
Moreover, Mbeki and many of his closest colleagues were the beneficiar-
ies of support from allied regional nationalist governments during the
1960s–80s. That this translated mainly into public soothing of a desperate
Robert Mugabe, and not concern for the welfare of ordinary people, is
clear from evidence of South African sub-imperialism reviewed in
Chapter two.
Other friends?
Even if it were in better economic shape, the Southern African region would
remain fragmented and war-torn. And even if Southern Africa one day
provides a platform for a renewal of strident Third World nationalism –
witness Mbeki’s ally Robert Mugabe, who with his currency peg in
1999–2000 sought a Malaysian-style exit option from volatile international
currency speculation – South Africa will still have to stitch together much
stronger alliances. As the 1998 Tripartite Alliance discussion document cited
earlier asked so pointedly, ‘Can we forge a Brasilia-Pretoria-Delhi-Beijing
Consensus in the absence of any Washington Consensus?’33 There is a faint
possibility, at the time of writing, of a G-5 bloc of semi-peripheral states:
Brazil, Nigeria, Egypt, India and South Africa, plus potentially Mexico and
Chapter 6 7/22/03 6:43 pm Page 130
South Korea in future. But as always, the barriers not only of language and
culture, but also of divergent material interests and ideology intervene.
There are, as well, at least a few G-8 ruling parties who Mbeki can
consider as formal allies, especially the British Labour Party and German
Social Democrats. As he told the ANC meeting, ‘less than a year ago, we
were admitted as members of the Socialist International. This is the biggest
of all the international political associations and contains the most pro-
gressive political parties from all countries.’34 In reality, those ‘most
progressive … parties’ within Europe turned out – at Okinawa, in the EU
trade negotiations, in international sports negotiations, and in so many
other settings – to sport a deadly punch. As a result, Mbeki turned in 2000
to the rulers of Sweden and Chile as potential real (not Third Way) social-
democratic comrades, but whether this generates a sustainable ideology for
the 21st century or is simply another gambit to faintly challenge the global
power centres remains to be seen.
Aside from other governments, international businesses are also imag-
ined and sometimes actual allies of Mbeki (as I note at the outset of the next
chapter). While as late as December 1999, Erwin entertained Cosatu’s
proposal that trade agreements and the WTO specifically be modified with
so-called ‘Social Clauses’ that invoke labour, social and environmental
protections, Mbeki had apparently jettisoned any reform along these lines
by the time of the Commonwealth Heads of Government Meeting
(CHOGM) a few weeks earlier:
We are pleased that the Commonwealth Business Council has made its own
submission to CHOGM on this critical matter. Indeed we agree with your
view that affirms the role of the WTO as an organisation that should be
solely concerned with fair and efficient conduct and regulation of inter-
national trade. Accordingly, we also agree that it should not become an
instrument for bringing extra-territorial policy changes outside the realm of
the WTO or, more important, an institution for introducing new and
discriminatory barriers to trade.35
For Erwin and Cosatu, the attempt to reform international trade through
Social Clauses was, arguably, also misguided. Partly, it relied upon a corpo-
ratist arrangement: the National Economic Development and Labour
Council in Johannesburg allowed big government, big business and big
labour to fashion a joint negotiating position. But, more generally, Social
Clauses violate fundamental principles of labour internationalism, namely
the need to avoid promoting the material interests of an oppressor nation
over those of an oppressed nation, above all when the wishes of the people
most affected have not been consulted.
To be sure, it is certainly appropriate to support boycotts against
apartheid-era South Africa and contemporary Burma – for whom sanctions
Chapter 6 7/22/03 6:43 pm Page 131
Notes
1 Fanon, F. (ed.) (1967), The Wretched of the Earth, Harmondsworth, Penguin, p. 186.
2 Mbeki, T. (2000), ‘Vox Populi – Is it Real?’ speech at the International Union of
Socialist Youth Festival, Stockholm, 28 July. This and all the following citations here
and in Chapter 7 attributed to Mbeki were published on the presidental website at
http://www.gov.za/
3 Zuege, A. (1999), ‘The Chimera of the Third Way’, in L. Panitch and C. Leys (eds),
Necessary and Unnecessary Utopias: Socialist Register 2000, London, Merlin and
New York, Monthly Review Press, p. 106.
4 Mbeki, op. cit.
5 Cited in Bond, P. (1998), ‘Global Financial Crisis: Why we should Care, What we
should Do’, Indicator SA, 15(3).
6 Mbeki, T. (1999), ‘Statement at the XII Summit Meeting of Heads of State and
Governments of the Non-Aligned Movement’, Durban, 3 September.
7 ANC, ‘The State, Property Relations and Social Transformation’, ANC discussion
document (mimeo) reprinted in the African Communist, fourth quarter 1998,
pp. 13–14.
8 ANC Alliance (1998), ‘The Global Economic Crisis and its Implications for South
Africa’, ANC Alliance discussion document, October, Johannesburg, reprinted in
The African Communist, 4th quarter.
9 Bond, P. (1999), ‘Global Economic Crisis: A View from South Africa’, Journal of
World Systems Research, 5(2).
10 Erwin, A. (1999), ‘Address to Parliament on the Challenges of Globalization at the
“Millennium” Debate Occasion’, Cape Town, 19 November.
11 Mbeki, T. (2000), ‘Lecture at Georgetown University’, Washington, DC, 23 May.
Chapter 6 7/22/03 6:43 pm Page 132
12 In early 1998, during Clinton’s visit to Cape Town, Nelson Mandela, SA president
at the time, expressed enormous dissatisfaction with the same legislation. A period
of severe US arm-twisting of African ambassadors to the US followed, and official
SA scepticism was reversed.
13 Mbeki, ‘Lecture at Georgetown University’.
14 Erwin, op. cit.
15 Cited in McSmith, A. (2000), ‘Mandela Pleads for the Funds to Fight Aids, Pokes
Fun at Demonstrators Protesting the Effects of Globalization’, Daily Telegraph,
29 September.
16 Mbeki, T. (2000), ‘Speech at the launch of the Presidential Strategic Leadership
Development Programme’, Pretoria, 23 July.
17 Mbeki, T. (2000), ‘Address to the Commonwealth Club, World Affairs Council and
US/SA Business Council Conference’, San Francisco, 24 May.
18 Mbeki, T. (2000), ‘Keynote address to the ANC National General Council’,
Port Elizabeth, 12 July.
19 Ibid.
20 See, for example, Business Day, 4 May 2000. The actual cost of the arms escalated
to R43 billion in mid-2000, with some independent estimates at R60 billion.
21 Hosking, S. and Bond, P. (2000), ‘Infrastructure for Spatial Development Initiatives
or for Basic Needs? Port Elizabeth’s Prioritisation of the Coega Port/IDZ over
Municipal Services’, in M. Khosa (ed.), Empowerment through Service Delivery,
Pretoria, Human Sciences Research Council.
22 Dr Chippy Olver, quoted in the Mail and Guardian, 22 November 1996.
23 Mbeki, T. (2000), ‘Berlin Communiqué: Progressive Governance of the 21st
Century’, Berlin, 23 May.
24 Details are provided in Bond, P., Dor, G. and Ruiters, G. (2000), ‘Transformation in
Infrastructure Policy from Apartheid to Democracy: Mandates for Change,
Continuities in Ideology, Frictions in Delivery’, in M. Khosa (ed.), Infrastructure
Mandates for Change, 1994–99, Pretoria, Human Sciences Research Council;
and Bond, P. and Ruiters, G. (2000), ‘Droughts and Floods: Water Shortages and
Surpluses in Post-Apartheid South Africa’, in Y. Muthien, M. Khosa and
B. Magubane (eds), Economic Transformation in South Africa: Democracy and
Governance Review, Pretoria, Human Sciences Research Council.
25 Manuel, T. (1999), ‘Address to the US-South Africa Business and Finance Forum’,
24 September.
26 See Ruiters, G. and Bond, P. (1999) ‘Contradictions in Municipal Transformation
from Apartheid to Democracy: The Battle over Local Water Privatization in South
Africa’, Working Papers in Local Governance and Democracy, 99(1).
27 This is common knowledge amidst industry professionals: interview, Ashraf Patel,
Wits P&DM LINK Centre.
28 See Bond, P. (2000), Cities of Gold, Townships of Coal, Trenton, Africa World Press,
Chapter 4, for more details.
29 Business Day, 19 February 2001.
30 Mbeki, ‘Address to the Commonwealth Club, World Affairs Council and US/SA
Business Council Conference’.
31 Mbeki, ‘Lecture at Georgetown University’.
32 Mbeki, T. (2000), ‘Address of the Chairperson of the Non-Aligned Movement at the
opening of the South Summit’, Havana, 12 April.
33 For the reference, see Chapter one, endnote 2.
34 Mbeki, ‘Keynote address to the ANC National General Council’.
Chapter 6 7/22/03 6:43 pm Page 133
CHAPTER SEVEN
1. Introduction
Can Thabo Mbeki change the world? It’s a fair question.
‘We will succeed in the struggle to end poverty and underdevelopment
in our country and continent’, Mbeki assured a captivated San Francisco
audience in May 2000, ‘provided we can count on the kind of support you
gave us as we fought together to end the system of apartheid.’1 Thus the
South African president invited leading representatives of US business,
who in reality had for decades been diehard supporters of apartheid, nearly
uniformly opposing ANC calls for comprehensive sanctions,2 to help
combat what Mbeki has already begun to term ‘global apartheid’ – a system
nearly as profitable for US capital as was South African racism. Either
Mbeki is lost, bewildered, capable of saying anything pleasing to any
audience to curry favour, like any politician – or something else is going on.
Mbeki would argue strenuously against the former interpretation, as
witnessed in August 2000 in his attack on the ‘Caliban native petit
bourgeoisie, with the native intelligentsia in its midst, that, in pursuit of
well-being that has no object beyond itself, commits itself to be the foot-
lickers of those that will secure the personal well-being of its members’.3 It
will become clear in excerpts from his speeches considered below that
Mbeki’s approach to the global ruling elite is not about personal self-
advancement, or even advancement of a goal so narrow as merely increas-
ing foreign investment in South Africa. Instead, let us take as a given that
Mbeki’s approach is to engage the global ruling elite so as to pave the way
for a continuation of the South African ‘revolution’.
For in the same speech as the one quoted above, Mbeki continued, ‘Our
own intelligentsia faces the challenge, perhaps to overcome the class limita-
tions which [Walter] Rodney speaks of, and ensure that it does not become
an obstacle to the further development of our own revolution.’ Taking this
position seriously, it is up to anyone engaging in analysis of global geo-
politics and economics to determine not whether Mbeki is seeking to
‘further develop’ the South African revolution through ever-more strategic
global insertions, but how he is managing such a challenge; what underlying
Chapter 7 7/22/03 6:43 pm Page 135
analysis informs the approach; what strategies and tactics are appropriate;
and whether alliances are properly considered – all of which are addressed
in the pages that follow.
Chapters one and two established the premise that economic ‘globalisa-
tion’ – by which is generally meant free flows of trade, finance and direct
investment, under conditions of overwhelming transnational corporate
power, underpinned by a system of embryonic world-state institutions
based mainly in Washington – simply doesn’t work for South Africa, or
Africa. For that reason, Mbeki and his closest colleagues – finance minister
Trevor Manuel, trade and industry minister Alec Erwin, ANC secretary-
general Kgalema Motlanthe and others – claim to be reforming the inter-
state and embryonic world-state system.
The reform strategy will fail, though, not because of lack of will, integrity
or positionality of those involved. After all, since 1994, extremely talented
South African officials have presided over the board of governors of the
IMF and World Bank, the Non-Aligned Movement, the United Nations
Conference on Trade and Development, the Commonwealth, the Organisa-
tion of African Unity, the Southern African Development Community and
a host of other important international and continental bodies.
Instead, the failure is already emanating from the very project itself, and
its underlying philosophy, inappropriate practical strategies and ineffectual
tactics (see Section 2). Instead of leading the world, Mbeki and his Pretoria
colleagues run a different danger: treading a well-known, dusty path, a cul-
de-sac of predictable direction and duration that, notwithstanding mixed
rhetorical signals (see Section 3), for all effective purposes excludes or most
often rejects, alliances with increasingly radical local and international
social, labour and environmental movements who in reality are the main
agents of progressive global change (see Section 4). Thus the South African
post-apartheid official leadership will not achieve its own limited objectives,
much less the further-reaching transformation required under the current
extremely difficult global conditions. And in concluding that Thabo Mbeki
cannot change the world, a more radical strategy necessarily arises as an
alternative.
Mbeki’s self-mandate
The world was becoming an increasingly brutal place when Thabo Mbeki
assumed the South African presidency in May 1999, as attested by rising
levels of mass popular protest. Thus by mid-2000, just before his first
anniversary in office, Mbeki emerged as an apparently far more aggressive
critic of the global status quo. He made a series of trips to international
political and economic centres, and debated global governance. His
colleagues, as well as other compatriots, played active roles in key multi-
lateral forums. Within Southern Africa, Mbeki burdened himself with
increasingly hands-on diplomatic functions (particularly in relation to
Zimbabwe and the DRC).
At first glance, this activity seemed to represent an impressive, forth-
rightly progressive attempt to rejig the global economy in the interests of
lower-income countries, to actualise the ‘African Renaissance’, and more
generally to imprint the world with South Africa’s successful political deal-
making model and ‘social democratic’ approach to development.
But at second glance, with a more careful interpretation of Mbeki’s
agenda, cynics could justifiably object to his minor tinkering, confused
and confusing rhetoric, reluctance to question received wisdom when
applied to domestic macroeconomic and industrial policy, failure to work
through the logic of the argument from broad generality to concrete
settings, and questionable alliances. While key speeches containing
insights into Mbeki’s strategy are invariably eloquent and well received,
they leave important intellectual questions hanging. This is obviously not
because of a deficient intellect (nor the failure of extremely talented
Government Communications and Information Services staff to stock the
presidential website with his best work). It is because the approach taken
is suffused with immense contradictions: on the one hand Mbeki argues
that, to paraphrase, ‘globalisation made me do it’;9 while on the other, he
occasionally resorts to advancing what are among the richest, most
profound critiques of international markets to be found in contemporary
South Africa.
Chapter 7 7/22/03 6:43 pm Page 138
Unethical development
With a distinctly distressed moral tone, Mbeki forthrightly complains about
the unfairness of the international system. Amongst intellectuals gathering
at a gala African Renaissance event in late 1999, for example, Mbeki’s
brilliant, wide-ranging speech tackled:
the problem we are facing even as we stand here, of arriving at the point
when we can conclude the bilateral agreement between our country and the
European Union. Stripped of all pretence, what has raised the question
whether the agreement can be signed today or not, is the reality that many
among the developed countries of the North have lost all sense of the noble
idea of human solidarity. What seems to predominate is the question, in its
narrowest and most naked meaning – what is in it for me! What is in it for
me! – and all this with absolutely no apology and no sense of shame.11
‘What is in it for me!’ The scorn with which Mbeki dismisses not only trade
realpolitik but also the very foundation of Adam Smith’s invisible hand as
optimal allocator of resources is noteworthy. He invokes, periodically,
deeply ethical contentions, as in this speech as head of the Non-Aligned
Movement to the Group of 77’s South Summit in Havana in April 2000:
‘All of us present in this hall represent countries that can pride themselves
on the continued existence of a strong spirit of communal, human solidar-
ity among many of our people. The atomisation of the family and the
individual, driven by the development and entrenchment of the capitalist
system, has not reached the structural permanence it has attained in the
developed countries of the North.’12
And again, in July 2000, just after Germany had won the 2006 soccer
World Cup by one vote, he told his party’s National General Council: ‘As
the ANC, we therefore understand very well what is meant by what one
writer has described as the globalization of apartheid.’13
It is with such phraseology that Mbeki accomplishes a dual elision: on
the one hand a displacement of the South’s problems from the untouchable
economic to the moral-political terrain, which in turn evokes calls for the
Chapter 7 7/22/03 6:43 pm Page 139
July 2000: ‘When we decided to address the critical question of the ANC
as an agent of change, the central subject of this National General
Council, we sought to examine ourselves as an agent of change to end the
apartheid legacy in our own country. We also sought to examine the ques-
tion of what contribution we could make to the struggle to end apartheid
globally.’17
The best answer – contradictory though it turns out to be – may come in
the field of pharmaceutical products, especially access to anti-retrovirals to
combat HIV/AIDS, as I will discuss below and in Part three. But the
answer Mbeki has instead provided, e.g. in Havana, combines at least five
basic challenges:
a) the alleviation of the debt burden carried by many … countries, includ-
ing its cancellation;
b) an effective mechanism to ensure a substantial increase in capital flows
into the developing economies as this is a prerequisite for development;
c) the reversal of the trend resulting in a sharp drop in official development
assistance;
d) the opening of the markets of the developed countries to our products,
including agricultural products; and
e) the transfer of technology.18
Debt debacle
I will consider these challenges one by one, while saving technology transfer
– in the case of drug patents – for Part three of the book. It is arguable that
Mbeki’s approach to the first challenge, debt relief, has done incalculable
damage, mainly by virtue of his failure to endorse the Jubilee 2000 South
Africa campaign against ‘odious debt’, including apartheid debt. Numerous
vitriolic debates between civil society and government have occurred on this
issue since 1996, and do not bear repeating in full here. Suffice to say,
Jubilee 2000 critics argue, that had Mbeki and his predecessor Nelson
Mandela been truly serious about the debt issue, they would not have:
a) agreed to repay the apartheid foreign debt to commercial banks when it
was last rescheduled in October 1993;
b) claimed, repeatedly, that there is no foreign debt owed by the South
African government (by ignoring roughly US$25 billion parastatal and
private sector debt, for which the South African state inherited repayment
and guarantor responsibilities);
c) negated the possibility of demanding reparations for previous foreign
credits to the apartheid regime; and
d) endorsed, repeatedly, the Highly Indebted Poor Countries initiative of the
G-8, IMF and World Bank, which proved such a distraction from the
cause of debt cancellation.19
Chapter 7 7/22/03 6:43 pm Page 141
‘drought relief’ (18 months after the drought ended). That loan bound
Pretoria to cutting government deficit spending from 6.8% to 6% of GDP
in 1994, and reducing wages. The conditions were kept secret until a
Business Day leak in March 1994. That newspaper’s top financial journalist
concluded that ‘The Reconstruction and Development Programme and the
TEC statement of policies to the IMF are arguably the two most important
clues on future economic policy … The ANC, in signing the statement of
policies to the IMF, committed itself to promoting wage restraint.’31 The
progressive sections of the RDP were subsequently ditched in practice.32
Motlanthe was also not told, apparently, about a $46 million World Bank
loan to promote exports in 1997, nor of tens of millions of dollars invested in
South Africa by the World Bank’s private-sector subsidiary, the International
Finance Corporation.33
Aid fatigue
In relation to the third challenge mentioned above, regarding foreign aid,
Mbeki calls for ‘more and better managed aid so as to deal with the basic
needs that will have to precede any form of development in certain areas’.34
One problem is that Mbeki did very little in practice to dissuade Clinton
and other international leaders from subscribing to the classically neo-
liberal notion of ‘trade, not aid’ (the 1990s value of North-South aid in the
1990s fell by a third).35
But what lessons does South Africa itself have to offer? Were foreign
donors encouraged, under post-apartheid rule, to turn aid pledges into real
programmes; sustainably provide for basic needs; promote civil society; and
support good aid-management (e.g. monitoring and evaluation, and regular
collective consultations with government)? There is a strong case, made in
Chapter four, that the Mandela and Mbeki governments were disastrous
models in all these respects.
As one example, donor pledges of nearly $5 billion were made to Pretoria
between 1994 and 1999. But just as government failed to disburse much of
its own domestic-sourced development funding (80% annual RDP-related
budget ‘rollovers’ were typical in the early years, but even during the late
1990s, inability to spend poverty relief funding became a national scandal),
the record of South Africa’s largest donor, the European Union, was also
appalling. So, in making the case for more aid internationally, Mbeki has not
yet provided a convincing case that such aid won’t exacerbate well-known
problems of bureaucratic capture and non-sustainability.
Trade rules
The fourth challenge deals with the opening of the markets of developed
countries to Third World products. Mbeki wants to correct what he calls
the ‘rules and regulations that make the world trading system unbalanced
Chapter 7 7/22/03 6:43 pm Page 145
and biased against the very countries that need a fair trading system so that
these countries, which represent the majority of humanity, benefit from
international rules of trade’.36 Even if the South African economy is on the
margins of world trade, Pretoria has won a high profile in global circuits for
at least three institutional reasons: Alec Erwin’s 1996–2000 presidency of
the UN Conference on Trade and Development; his controversial role in
the WTO Summit in Seattle in 1999; and his subsequent attempt to bring
together a new ‘G-5’ middle-income bloc to restart WTO negotiations. The
latter two functions – particularly Erwin’s distaste for the Seattle social-
movement protesters and his near refusal to join the Africa bloc of trade
ministers protesting against abominable treatment by US trade negotiator
Charlene Barshefsky – must await treatment by other experts.37
Throughout, Erwin has argued for less Northern protectionism for
‘dinosaur industries’ like manufacturing and agriculture, but he has done so
meekly and ineffectually: ‘In addressing the challenge of trade and devel-
opment in UNCTAD IX, we were attempting to break with a conception of
contestation by stressing partnership.’38
‘Partnership’. Yet it is worth asking how partnership has benefitted South
Africa in the transfer of technology, e.g. in the case of patent surrender on
vitally needed AIDS drugs? How has it generated mutual interest in trade –
instead of the response ‘What is in it for me!’? How has it transformed aid?
How has it generated investment – with Mbeki bending over backwards to
Washington’s economic prescriptions? How has it accomplished even a
modicum of debt relief?
Progress on any of these issues depends on who one is in partnership
with, of course. At one point in his US trip, speaking to an African-
American congregation at the venerable Ebenezer Church in Atlanta,
Mbeki invoked the forces of social progress:
In a world where no country can insulate itself from other parts of the same
world, our success is highly dependent on your concrete support. This
global solidarity between ourselves was part of the vocabulary of the civil
rights movement, and some of us will remember that Dr King was one of the
first world leaders to call for a boycott of South Africa as part of the strug-
gle for democracy. This kind of solidarity amongst those who work for the
same objectives, has been the hallmark of our own movement and struggle
for democracy. We are therefore saying that we should continue with this
struggle of working together and striving for social and economic justice for
the poor, for countries of the South, and come with practical ways of assist-
ing Africa to pull herself out of the quagmire of poverty. I can assure you that
you will find many amongst Africans who are ready to work in honest part-
nership with yourselves.39
Chapter 7 7/22/03 6:43 pm Page 146
But with whom in the world does Mbeki really have an honest partner-
ship, and with whom is he building genuine solidarity? Notwithstanding
the eloquence of his Atlanta speech, the answers are not obvious.
Under Mbeki’s influence, post-apartheid foreign policy examples of
areas where solidarity was not extended to democrats include Western
Sahara’s Polisario Front, the Indonesian and East Timorese people suffer-
ing under Suharto (recipient of a Cape of Good Hope medal in 1997),
Nigerian opposition activists who in 1995 were denied a visa to meet in
Johannesburg, the Burmese people (given the junta-controlled ‘Myanmar’s’
unusual diplomatic relations with Pretoria), and victims of murderous
central African regimes which were recipients of SA arms. The National
Conventional Arms Control Committee reported that from 1996 to 1998,
undemocratic regimes in countries like Colombia, Algeria and Peru
purchased more than R300 million worth of arms from South Africa.40
Allies in health?
Sadly, the answer is negative, as demonstrated by the single most evocative
issue associated with globalisation and public policy in South Africa:
HIV/AIDS treatment. Early signs were encouraging, as I will note in the
next two chapters, for during a brief, extraordinary period, Mbeki and his
then-health minister (now foreign minister) Nkosazana Dlamini-Zuma
forthrightly attacked the prerogatives of transnational corporate capital in
the pricing of pharmaceutical products, particularly anti-retroviral drugs
used in the treatment of HIV/AIDS. Tragically, this was an exception that
proved the rule, for the confrontation soon became Mbeki’s most embar-
rassing failure – not only to change the world, but to change the trajectory
of mass death facing his desperately ill domestic constituency.
There was a chance for an alliance. A vibrant Treatment Action
Campaign emerged in 1999, embarked on protests at US consulates in
Johannesburg and Cape Town, and began networking with the
Philadelphia, New York and Paris chapters of the advocacy group ACT
UP. US vice-president Al Gore – a lobbyist on behalf of pharmaceutical
firms – was confronted repeatedly and aggressively in Tennessee, New
Hampshire, California and Pennsylvania at the very outset of his campaign.
Numerous newspapers carried front-page stories on Gore’s quandary.
Within weeks, the vice-president’s own cost-benefit analysis began to
reveal the danger of siding with the pharmaceutical firms, whose millions
would not offset sustained damage to Gore’s image. In a meeting with
Mbeki in New York in September 1999, Gore conceded the validity of the
Chapter 7 7/22/03 6:43 pm Page 147
Mbeki must realise who the genuine allies of the South African people
are, for he has invoked the Seattle phenomenon as a kind of threat, as a way
of telling audiences that there is a more revolutionary option if they do not
meet his demands. Speaking to Washington elites at Georgetown in May
2000, Mbeki quoted from Shelley’s ‘Ode to the West Wind’: ‘It may be that
the protesters who besieged the negotiators at Seattle were, in their way, our
own West Wind. What they said, if they spoke for the pestilence-stricken
multitudes, yellow, and black, and pale, and hectic red, was indeed that
since Winter was already upon these multitudes, Spring was not far
behind.’43
To a different audience of social-democratic activists, Mbeki was resolute
in his commitment to nurture challenges from the grassroots:
All of us, but most certainly those of us who come from Africa, are very
conscious of the importance that all tyrants attach to the demobilisation of
the masses of the people. At all times, these tyrants seek to incite, bribe or
intimidate the people into a state of quiescence and submissiveness. As the
movement all of us present here represent, surely our task must be to
encourage these masses, where they are oppressed, to rebellion, to assert the
vision fundamental to all progressive movements that – the people shall
govern!44
The problem is that this kind of support – Mbeki generously praising
demonstrators for raising consciousness – is not, in fact, mutual. For
consciousness-raising is only a small fraction of the concrete challenge that
many of the leading protest movement organisations have set for them-
selves, the essence of that challenge being to shut down the WTO, World
Bank and IMF (see Chapter ten). Mbeki’s approach is the precise opposite,
i.e. to gain greater admittance.
Serious reform
The radical strategy is multifaceted, but at the end of the day is not merely
destructive or protectionist, as Erwin and Manuel repeatedly posit. Recall
the first great reformer of the IMF and World Bank, i.e. John Maynard
Keynes, a key co-founder. When Keynes failed to persuade the dominant
US negotiators of the need for a more politically neutral institution at the
1944 Bretton Woods and 1946 Savannah conferences, he was despondent.
As one account has it, ‘Keynes had argued so bitterly at Savannah with US
Treasury Secretary Fred Vinson and was so distressed by the course on
which the Bank seemed to be set that his friends blamed the meeting for the
heart attack he suffered on the train back to Washington, and for a second,
a month later, which killed him at the age of 63.’45
It may be useful to conclude with the kind of changes to the world econ-
omy for which Keynes once firmly argued. For, if one only added ‘political
Chapter 7 7/22/03 6:43 pm Page 149
solidarity’ to the list of globalisation goods, the words that follow are
perfectly consonant with the radical strategy noted above: ‘I sympathise
with those who would minimise, rather than with those who would
maximise, economic entanglement among nations. Ideas, knowledge,
science, hospitality, travel – these are the things which should of their nature
be international. But let goods be homespun whenever it is reasonably and
conveniently possible and, above all, let finance be primarily national.’46
This, to be sure, is the kind of either/or formulation that may well be
objectionable to a both/and dialectitian of Mbeki’s accomplishment.
Keynes was perhaps not only a more active, successful and visionary shaper
of global circumstances than Mbeki – albeit from a stronger power base in
Britain, yet also ultimately a subservient and frustrating one – but in the
words quoted above he also captured the essence of a bumper-sticker
slogan that is often heard in the contemporary international social justice
movement: ‘The Globalisation of People, not of Capital!’ It is that slogan
which says so much more about strategy, tactics and alliances than can
Thabo Mbeki, and in turn hints more profoundly about why he probably
won’t – notwithstanding his ambitions, integrity and best efforts – change
the world.
Notes
1 Mbeki, T. (2000), ‘Address to the Commonwealth Club, World Affairs Council and
US/SA Business Council Conference’, San Francisco, 24 May.
2 Perhaps Desmond Tutu put it best: ‘I would be more impressed with those [US
companies] who made no bones about the reason they remain in South Africa and
said honestly: “We are concerned for our profits” instead of the baloney that the
businesses are there for our benefit. We don’t want you there’ (New York Times,
16 June 1986). For further reminders of the dissonance in Mbeki’s remark, see also
Innes, D. (1989), ‘Multinational Companies and Disinvestment’, in M. Orkin (ed.),
Sanctions Against Apartheid, Cape Town, David Philip.
3 Mbeki, T. (2000), ‘Ou Sont Ils, en ce Moment – Where are They Now?’, second
Oliver Tambo Lecture for the National Institute for Economic Policy,
Johannesburg, 11 August.
4 Michie, J. and Padayachee, V. (1997), ‘The South African Policy Debate Resumes’,
in J. Michie and V. Padayachee (eds), The Political Economy of South Africa’s
Transition, London, Dryden Press, p. 229.
5 Mbeki, T. (2000), ‘Keynote Address to the ANC National General Council’, Port
Elizabeth, 12 July.
6 The post-apartheid government’s uneven relationship to the RDP is documented in
Bond, P. and Khosa, M. (eds) (1999), An RDP Policy Audit, Pretoria, Human
Sciences Research Council Press.
7 Notwithstanding Mbeki’s plea in Japan in July 2000, there was nothing further on
offer to either the poorest countries or to those like Nigeria and South Africa that
were victims of odious debt repayments. See the Jubilee 2000 South Africa and
Jubilee South websites at http://www.aidc.org.
8 Though it was never pointed out publicly, the dispute mainly reflected the
Orwellian power of the ad. man to brainwash European consumers, for while no
Chapter 7 7/22/03 6:43 pm Page 150
one challenged the right of South African producers to fill their bottles with port
or sherry, they were prohibited from using what were formerly generic names on
the outsides of the bottles.
9 As already noted in the Preface, I borrow John Saul’s ironic phrase capturing at least
one common justification for non-delivery; Saul expands on this theme in his latest
book, Millenial Africa: Capitalism, Socialism, Democracy, Trenton, Africa World
Press.
10 Mbeki, T. (2000), ‘Remarks at the State Banquet, White House’, Washington, DC,
22 May.
11 Mbeki, T. (1999), ‘Speech at the Launch of the African Renaissance Institute’,
Pretoria, 11 October.
12 Mbeki, T. (2000), ‘Address at the Opening of the South Summit’, Havana, 12 April.
13 Mbeki, ‘Keynote Address to the ANC National General Council’.
14 Ibid.
15 Ibid.
16 Erwin, A. (1999), ‘Address to Parliament on the Challenges of Globalization at the
“Millennium” Debate Occasion’, Cape Town, 19 November.
17 Mbeki, ‘Keynote Address to the ANC National General Council’.
18 Mbeki, ‘Address at the Opening of the South Summit’.
19 See Bond, P. (2000), Elite Transition, London, Pluto Press and Pietermaritzburg,
University of Natal Press, Chapters 5 and 6, and http://www.aidc.org.za.
20 Manuel, T. (1999), ‘Address to the US-South Africa Business and Finance Forum’,
24 September.
21 See Bond, P. (2000), ‘A Case for Capital Controls’, South African Journal of
Economics, 68(4).
22 Cited in Plotz, D. (2000), ‘How Others see the President: An American View’, in
Slate magazine, and reprinted in the Mail and Guardian, 21 July, p. 31.
23 A detailed description is in Bond, P. (2001), ‘The World Bank, International
Monetary Fund, Third World Debt and Foreign Finance: Southern African
Debates’, in J. Coetsee, J. Graaf, F. Hendricks and G. Wood (eds), Development for
the New Millennium, Cape Town, Oxford University Press.
24 Global Dialogue, 4(2), p. 15.
25 Ibid.
26 Ibid.
27 This is confirmed in World Bank (1999), South Africa – Country Assistance Strategy,
Washington, DC.
28 Mail and Guardian, 5 May 2000.
29 Caufield, C. (1997), Masters of Illusion: The World Bank and the Poverty of Nations,
London, Macmillan, p. 206.
30 Mail and Guardian, 5 May 2000.
31 Business Day, 30 May 1994.
32 Bond, Elite Transition, Chapter 3.
33 These include stakes in Dominos Pizza (which subsequently went bankrupt), in for-
profit healthcare, in housing securities to make the homes of high-income people
more affordable, and in infrastructure privatisation, none of which fight poverty
(and all of which add a US-dollar liability to South Africa’s stressed current
account). For details on the latter IFC strategy, see Bond, Cities of Gold, Townships
of Coal, Chapter 4.
34 Mbeki, ‘Address to the Commonwealth Club, World Affairs Council and US/SA
Business Council Conference’.
35 Financial Times, 11 November 1998.
Chapter 7 7/22/03 6:43 pm Page 151
36 Mbeki, ‘Address to the Commonwealth Club, World Affairs Council and US/SA
Business Council Conference’.
37 See, for example, Keet, D. (2000), ‘South Africa’s Role in the WTO’, Alternative
Information and Development Centre occasional paper, Cape Town.
38 Erwin, A. (2000), ‘Opening Address to the Tenth Session of UNCTAD’, Bangkok,
12 February.
39 Mbeki, T. (2000), ‘Address at the Ebenezer Baptist Church’, Atlanta, 26 May.
40 Batchelor, P. (1999), ‘South Africa: An Irresponsible Arms Trader?’, in Global
Dialogue, 4(2) p. 17.
41 The firms reacted with promises of cheaper, though not free, drugs, which in turn
were spurned by activists as too little, too late. When faced with the prospect of local
production, drug companies changed the subject by announcing offers of free medi-
cine, which subsequently did not materialise.
42 ANC (1996), ‘The State and Social Transformation’, discussion document reprinted
in African Communist, 4.
43 Mbeki, ‘Lecture at Georgetown University’, Washington, DC, 23 May.
44 Mbeki, ‘Vox Populi – Is it Real?’ speech at the International Union of Socialist
Youth Festival, Stockholm, 28 July.
45 Caufield, Masters of Illusion, p. 47.
46 Keynes, J. M. (1933), ‘National Self-Sufficiency’, Yale Review, 22(4), p. 769.
Part 3 7/22/03 6:44 pm Page 153
PA R T THREE
CHAPTER EIGHT
in part because most wealthy white South Africans were covered by private-
sector medical-aid services while most black people weren’t, and in part
because of personal conviction and courage, Zuma was far more radical in
seeking social justice and redistribution than her colleagues. She challenged
extremely powerful health-sector interests: tobacco companies, urban
doctors, medical-aid companies and insurers. Her strongest campaign was
against international pharmaceutical pricing, which she argued was
discriminatory because it was based on extremely high levels of market
concentration and which therefore prevented South Africa from having
access to drugs at affordable prices, even those produced locally by
subsidiaries of the major international firms.
Particularly in relation to HIV/AIDS treatment, this represented an
area where Dlamini-Zuma could make amends with dissatisfied
constituents. The minister was regularly criticised by AIDS activists during
the ANC’s first term for squandering millions of dollars on a questionable
AIDS education drama, for mismanaging the alleged cure for AIDS known
as ‘virodene’ (ultimately regarded as toxic and unusable), and for imposing
mandatory notification for those determined to be HIV-positive, notwith-
standing contrary advice from virtually all quarters. In addition, the
closure of several major hospitals, the relatively slow pace at which clinics
were being built, and ineffectual AIDS consciousness-raising meant that
treatment and indeed education were severely hampered. Most impor-
tantly, however, in early 1999 Zuma claimed that budget shortfalls – in the
context of South Africa’s failed homegrown structural-adjustment
programme (which cut the state budget deficit/GDP ratio from 9% in
1994 to just over 3% in 1999) – prevented her from providing HIV-
positive pregnant women with zidovudine at several ante-natal pilot
projects. (Thousands of lives would have been saved by treating such
women with zidovudine, at a cost of about $13 million per year.) But, as I
will discuss in the next chapter, the deterrent was funding. AZT, invented
by the US government and made by Glaxo-Wellcome, costs $240 a month
in South Africa, but just $48 a month using a generic Indian-made version.
Glaxo-Wellcome offered to discount the price by 70% for the purposes of
the pilot trials, which, controversially, Dlamini-Zuma refused because of
the broader budgetary implications.
The high cost of AZT, zidovudine and other drugs was the basis for a
major pharmaceutical-policy initiative to augment the Department of
Health’s more progressive policies. Consistent with the constitutional right
to healthcare (within reasonable budgetary constraints), the Ministry of
Health had committed itself to providing many health services free to all
South African permanent residents. In 1994, free primary care was offered
nationally to pregnant women and children under six, and in 1996
expanded (in policy if not in practice) to include ‘all personal consultation
Chapter 8 7/22/03 6:42 pm Page 156
Africa’s case, this required US officials to ignore existing WTO rules govern-
ing TRIPS, which permit parallel imports and compulsory licensing, as well
as identical provisions practised in various areas of US commerce, which
South Africa wanted to impose on life-saving pharmaceutical products.
As James Love summarised the South African position:
TRIPS requires 20-year patents on pharmaceutical, and South Africa has
20-year patents on pharmaceutical;
parallel importing and compulsory licensing are part of the patent system,
and both are legal under the WTO TRIPS agreement (for parallel imports
the TRIPS provision is Article 6, Exhaustion of Rights, and for compul-
sory licensing it is Article 31) … ;
the South African government is simply trying to use the patent system in
ways that the USA, Germany, England and other countries do, including
the use of compulsory licensing, which is a common practice in the US for
many areas … ; and
AZT and ddI, which are two of the prime candidates for compulsory
licensing in South Africa, are US government-funded inventions.9
These arguments were consistently ignored or rejected by US officials. The
US State Department and the US embassy in Pretoria, US commerce secre-
tary Richard Daley, US trade representative Charlene Barshefsky and her
assistant Rosa Whitaker, and Vice-President Al Gore together intensified
pressure in 1998–9 to force Dlamini-Zuma to drop the ‘offending passage’
from the Medicines Act.
President Gore made the issue of intellectual property rights protection, and
pharmaceutical patents in particular, a central focus of his discussions with
Deputy President Mbeki. They agreed on a basis for a mutually satisfactory,
Government-to-Government negotiated solution to the impasse. Suspended
GSP benefits would be restored as progress was made in these negotiations.
This basis was developed and unanimously supported by all interested US
Government agencies. USTR was identified to lead the US Government’s
negotiation efforts. Initial discussion between the Assistant US Trade
Representative for Services, Investment and Intellectual Property and the
Deputy President’s legal advisor took place in September 1998 and follow-
on talks were conducted in November. During these discussions, the South
African officials attempted to persuade the US Government to intervene
with the US pharmaceutical industry to suspend or terminate its pending
legal challenge to the offending provisions of the South African Medicines
Act. The State Department, together with the Commerce Department and
USTR, decided that such an action might undermine the leverage that US
companies were exerting through their legal challenge. US officials told the
South Africans that since the US Government is not a party to the litigation,
the USG was unable to agree to this request. A subsequent round of face-to-
face negotiations between USTR officials and Deputy President Mbeki’s
advisors is tentatively scheduled to be held in Cape Town just prior to the
February 1999 Binational Commission meeting.
A ‘new’ medicines law. Meanwhile, during the fall of 1998, the South
African parliament drafted and considered a new medicines law that would
replace the existing Medicines Act, including the offending amendments.
The State Department’s Economic Minister Counselor in Pretoria met with
a key Mbeki advisor in September 1998 to advocate the removal of Article
15(c) provisions from the new proposed law. In October 1998, at the State
Department’s suggestion, the Embassy dispatched an economic officer to
Cape Town to monitor the committee and full chamber debates. He force-
fully advocated the US position and advised parliamentarians that the new
law should not include provisions that jeopardize patent rights. Despite
these strenuous efforts, a new medicines bill was passed including provisions
identical to Article 15(c), in November 1998. On December 4, 1998, the
Assistant US Trade Representative for Services, Investment, and Intellectual
Property sent a letter to Deputy President Mbeki’s legal advisor Mojanku
Gumbi noting the USG’s interest that the discussions lead to a mutually
agreeable settlement. As a way of spurring the discussions, he informed
Gumbi that the US would be prepared to release a significant portion of the
withheld GSP benefits should such a settlement be reached. Progress has
been slow, but we understand talks are continuing.
In November 1998, the State Department’s Economic Minister Counselor
in Pretoria met with South African Department of Foreign Affairs officials
Chapter 8 7/22/03 6:42 pm Page 162
there are important public health issues. Apparently Vice President Gore’s
office, the Department of State and USTR are also using talking points to
attack South Africa Health Minister Zuma on the grounds that she has
rejected a Glaxo/US government offer to provide temporary AZT donations
to some pregnant mothers, an offer that reportedly may contain other condi-
tions on South Africa. I asked if anyone in the US government with a public
health competence was involved in the decision to attack Dr. Zuma on this
issue, and if this was part of a public relations ploy to undermine her posi-
tions on the broader International Property Rights issues. Apparently US
trade officials are telling South Africa that any legislation that specifically
provides for compulsory licensing of patents on public health grounds are a
violation of the TRIPS, on the grounds that Article 27.1 of the TRIPS says
that patent rights should be enjoyed ‘without discrimination as to … the
field of technology,’ and that any special programme for compulsory licens-
ing on public health grounds is discriminatory. This is considered an absurd
interpretation of the TRIPS by most trade experts, including the staff of the
WTO, WIPO and the WHO, who point out the wide latitude of the TRIPS
to provide for compulsory licensing in Article 31 on virtually any public
interest grounds, subject of course to the Article 31 safeguards and require-
ments for remuneration. We intend to formally ask USTR for clarification on
this point, and to seek outside opinions on what we consider a bad faith
interpretation by the US (the same US that has several special statutory
programmes for compulsory licensing under the Bayh-Dole Act, the Clean
Air Act and for Nuclear energy). It goes without saying, but I was told that
PhRMA and individual companies have a well functioning system of work-
ing with Congress and the heads of Administration agencies to advance their
interests on this issue, and they have expressed concerns on several
occasions about the compulsory licensing issue with South Africa.20
The most charitable interpretation possible of Gore’s intervention was his
desire to maintain drug-company research and development funds.
According to a spokesperson, Gore and Mbeki were ‘committed to work-
ing together to chart a course that will meet the medical needs of those
infected with HIV or AIDS, without cutting off the commercial incentives
that fuel medical research in the first place’.21 Those commercial incentives
are worth considering in more detail, for their uses extend far beyond
research and development (R&D) costs, and into the corruption of the
democratic political process.
If anyone wants to kill incentives for further research into a targeted disease
area (e.g., AIDS) then one of the quickest ways to do this is to institute a
compulsory licensing regime for drugs that treat that disease. Compulsory
licensing benefits nobody except the fortunate commercial entity that is the
beneficiary of the largesse offered by such licenses. In the medium and long-
term, it is patients who will lack new treatments for serious diseases that
suffer, as researchers will undoubtedly stay away from targeted disease
groups subject to CL policies. Compulsory licensing seriously detracts from
the purpose of the patent system, which as the 16th President of the US,
Abraham Lincoln said, ‘provides the fuel for the fire of genius’.27
Dubious incentives
But whether anti-retroviral drugs are the product of hundreds of millions
of dollars worth of corporate R&D spending is hotly contested. To put the
claim into perspective, Love cites studies that demonstrate the huge share
of R&D covered by government:
In 1997 prices, the average out-of-pocket costs of clinical trials needed for
FDA approval were $25 million. Adjusted for risk, the ‘per approval’ cost of
clinical trials was $56 million … [Higher estimates] adjust these costs some-
what higher to include ‘capital costs’ for financing trials, but also and most
importantly the cost of preclinical research, which accounts for 70 to 80 per
cent of the total cost of drug development in some studies. Moreover, it is
often governments rather than the drug companies that pay for clinical and
preclinical research. For example, according to US tax returns, from 1983 to
1993 the pharmaceutical industry reported expenditure of only $213 million
on clinical trials for orphan drug development. This was about $2.3 million
for each of the FDA’s 93 orphan drug approvals during the period.28
A debate over the R&D cost incidence of AZT arose in the New York Times
nearly a decade earlier, in September 1989, following claims by a pharma-
ceutical company that it was responsible for the original research. Five
scientists from the National Institute of Health and Duke University
rebutted this claim:
The Sept. 16 letter from T. E. Haigler Jr., president of the Burroughs
Wellcome Company, was astonishing in both substance and tone. Mr.
Haigler asserts that azidothymidine, or AZT, was essentially discovered and
developed entirely by Burroughs Wellcome with no substantive role from
Government scientists and Government-supported research … Indeed, one
of the key obstacles to the development of AZT was that Burroughs
Wellcome did not work with live AIDS virus nor wish to receive samples
from AIDS patients. In a number of specific ways, Government scientists
made it possible to take a drug in the public domain with no medical use and
Chapter 8 7/22/03 6:42 pm Page 169
make it a practical reality as a new therapy for AIDS. It is unlikely that any
drug company could have found a better partner than the Government in
developing a new product. We believe that the development of this drug in
a record two years, start to finish, would have been impossible without the
substantive commitment of Government scientists and Government tech-
nology.29
Nevertheless, the pharmaceutical industry still uses a figure of hundreds of
millions of R&D dollars per drug, as did Truit of the PhRMA.30
Preparing to fight
Going into this battle, the pharmaceutical industry was well armed. The
Center for Responsive Politics recorded the flow of funds to politicians and
concluded: ‘Long one of the most powerful lobbies on Capitol Hill, the
pharmaceutical industry spent nearly $12 million in soft money, Political
Action Committee, and individual donations during the 1997–8 elections –
a 53% increase over donations during the last mid-term elections.’33
As just one positional reflection of the industry’s power, the New York
Times board of directors includes three pharmaceutical leaders: Richard
Gelb, chairman emeritus of Bristol Myers Squibb; Raul Cesan, CEO of
Schering-Plough; and Henry Schacht, a director of Johnson and Johnson.
(Perhaps because insurance executives are also prominent on its board, the
Times repeatedly editorialised during the mid-1990s in support of the
alleged ‘new consensus for healthcare reform’, managed competition.)34
As a function of their networking within the US ruling class, pharma-
ceutical firms have become particularly close to Vice-President Gore. As
Love points out,
Gore is also closely linked to PhRMA and its lobbyists. Member companies
contributed significantly to Gore’s PAC. One of PhRMA’s key lobbyists is
Anthony Podesta, the brother of Clinton Chief of Staff John Podesta, a
friend and advisor of Gore. Anthony Podesta also worked for Gore’s David
Beier when Beier – now Gore’s chief Domestic Policy Advisor – was
Genetech’s lobbyist, and is the landlord of Simon Strategies, which shares
office space and projects with Podesta’s firm … According to lobbying
disclosure reports, Podesta.com … have 11 persons working on the PhRMA
account.35
4. Resistance
The pharmaceuticals industry requires excellent public relations – and
spends lavishly on advertising (more than on drug R&D, typically) – for the
ability to influence consumption. This is increasingly true in the Third
World, where a typical country imports between 15 000 and 20 000 prod-
ucts, costing half their health budgets. In part as a result of rapidly growing
Chapter 8 7/22/03 6:42 pm Page 171
Critique emerges
Hence, many critics have taken up the issue by publicising Gore’s apparent
hypocrisy. Writing in American Prospect (an influential political journal in
the Clinton New Democrat tradition), an editor of the neo-liberal New
Republic, John Judis, condemns the pharmaceutical lobby’s White House
clout:
PhRMA, of course, is acting like a lobby – pressing the interests of its clients
even when their case is weak and morally repugnant – but what is astonish-
ing is that the Clinton administration has thrown its full weight behind their
complaint … The Clinton administration has regularly put the export and
investment concerns of American businesses above human rights and even
security considerations. But in most of these cases, it could claim that it was
acting in the national interest … Gore’s willingness to do PhRMA’s bidding
in this case may indicate that on the issues that impinge upon his high-tech
network of supporters, he is willing to do the wrong thing to keep them
happy – and keep them in his corner.37
In May 1999, journalists began ridiculing Gore in liberal periodicals,38
noting that a speech in Atlanta to prominent church-people that month
included the line, ‘Without values of conscience, our political life degener-
ates.’39 Prominent activists attacked Gore publicly:
According to Nader, ‘Gore is representing the profit-glutted pharmaceutical
industry, using the facilities of the US government, to browbeat the South
African Ministry of Health’ …
Standing next to Mbeki at a February news conference in Cape Town,
Gore, the favorite for the Democratic presidential nomination in 2000,
called AIDS ‘a crisis for South Africa’ and said the problem ‘must be faced
with a new level of urgency’. AIDS activists, however, criticized Gore for
Chapter 8 7/22/03 6:42 pm Page 172
publicly promising to fight AIDS while working behind the scenes against
South Africa’s medicines law. ‘It really is hypocritical for the administration
to pretend to be concerned about AIDS when they’re taking actions … that
are denying people access to very essential medicines,’ said Eric Sawyer,
executive director of the HIV/AIDS Human Rights Project …
Gore was more worried about competing for campaign dollars from drug
companies than in helping AIDS patients, Nader charged. Gore’s only
announced Democratic challenger, former Sen. Bill Bradley, hails from New
Jersey, home of more than a dozen drug makers, Nader noted. ‘He (Gore)
wants to go up to New Jersey and curry favor with the pharmaceutical indus-
try,’ Nader said.40
than the United Kingdom, and 47 of the drugs evaluated had a mark-up of
over 100%!44
Moreover, early 1999 also witnessed an increase in resistance on the interna-
tional level. At the 52nd World Health Assembly in Geneva in January,
which had representation from 191 countries, a unanimous resolution was
passed on the WHO’s Revised Drug Strategy. According to Dlamini-Zuma’s
special advisor, Ian Roberts, ‘The main importance of this resolution is that
health now has a role in all international trade and finance agreements.’45
Strategies to pin down pharmaceutical companies and untie their drug
patents through clever wording in WTO/TRIPS and other international
settings appeared set to continue.46
The contemporary balance of forces is not optimal for winning or imple-
menting such agreements, as witnessed not only by the fact that the
Medicines Act was tied up in South African courts from 1998 through April
2001, but more generally by how thoroughly Third World interests have
been negated in most international trade and financial negotiating fora. In
a letter to Gore in May 1999, Nader noted that the Vice-President’s ‘aston-
ishing array of bullying tactics to prevent South Africa from implementing
policies … designed to expand access to HIV/AIDS drugs … [amount to]
an affront to the sovereignty of Third World nations’.47
Notes
1 For background, see, for example, Bond, P., Pillay, Y. and Sanders, D., ‘The State of
Neoliberalism in South Africa: Developments in Economic, Social and Health
Policy’, International Journal of Health Services, 27(1); and Bond, P. and Pillay, Y.
(1995), ‘Health and Social Policies in the New South Africa’, International Journal
of Health Services, 25(4).
2 Republic of South Africa Department of Health (1996), Towards a National Health
System, Pretoria, p. 11.
3 Republic of South Africa Department of Health (1997), Annual Report, Pretoria,
p. 6.
4 Republic of South Africa Department of Health, Towards a National Health System,
p. 35.
5 Republic of South Africa (1997), Medicines and Related Substances Control
Amendment Act, Cape Town, pp. 6–7.
6 Love, J. (1999), ‘Info-Policy-Notes: US Law Requires US Department of State to
Seek Repeal of South African Law on Essential Medicines’, Consumer Project on
Technology, Washington, DC, 7 April.
7 Richwine, L. (1999), ‘US Blocking Distribution of AIDS Drugs, Critics Say’, San
Francisco Examiner, 12 April.
Chapter 8 7/22/03 6:42 pm Page 175
8 Cited in Navarro, V. (1994), The Politics of Health Policy: The US Reforms, 1980–94,
Oxford, Basil Blackwell, p. 214.
9 Love, J. (1999), personal e-mail communication, Washington, DC, 16 April.
10 Larkin, B. (1999), ‘US Government Efforts to Negotiate the Repeal, Termination or
Withdrawal of Article 15(c) of the South African Medicines and Related Substances
Act of 1997’, US Department of State report, Washington, DC, 5 February.
11 United States Congress (1998), Omnibus Consolidated and Emergency
Supplemental Appropriations Act, 1999 (HR 4328), Washington, DC, 21 October.
12 Barber, S. (1998), ‘Plan Blunts Long-Term Threat to US Aid for SA’, Business Day,
20 July.
13 Mitchell, D. (1999), ‘Compulsory Licensing of Anti-HIV Drugs Stirs Debate in
Geneva’, Journal of the American Medical Association, HIV/AIDS Health
Information (Internet version), 1 April.
14 Médécins sans Frontières Health Action International and Consumer Project on
Technology (1999), ‘AIDS and Essential Medicines and Compulsory Licensing:
Summary of the 25–27 March, 1999 Geneva Meeting on Compulsory Licensing of
Essential Medical Technologies’, Geneva, 9 April.
15 Ibid.
16 Ibid.
17 Ibid.
18 United States Trade Representative (1999), ‘Special 301 Review’, Washington, DC,
30 April.
19 Nader, R. (1999), ‘Medicine held Hostage by Profits’, San Francisco Bay Guardian,
28 April.
20 Love, J. (1999), ‘Gore/Mbeki Commission and Compulsory Licensing Disputes
with South Africa’, personal e-mail communication, Washington, DC, 2 April.
21 Richwine, L. (1999), ‘Gore Worked to Soften South Africa Health Law’, Reuters,
Washington, DC, 16 April.
22 Goozner, M. (1999), ‘Third World Battles for AIDS Drugs’, Chicago Tribune,
28 April.
23 Sternberg, S. (1999), ‘Victims lost in Battle over Drug Patents’, USA TODAY,
24 May.
24 Barber, S. (1998), ‘US Withholds Benefits over Zuma’s Bill’, Business Day, 15 July.
25 Pharmaceutical Research and Manufacturers of America (1999), ‘PhRMA supports
USTR on South Africa’, Washington, DC, 30 April.
26 Sternberg, op. cit.
27 Bale, H. (1999), ‘IFPMA Position on Compulsory Licensing’, e-mail communication
to Treatment-access Forum (treatment@critpath.org), Geneva, 15 April.
28 Love, J. (1999), ‘Who pays What in Drug Development’, Nature, 21 January.
29 Mitsuya, H., Weinhold, K., Yarchoan, R., Bolognesi, D. and Broder, S. (1989),
‘Credit Government Scientists with Developing Anti-AIDS Drug’, New York Times,
28 September.
30 Sternberg, op. cit.
31 Love, J. (1999), ‘Statement on Bristol-Myers Squibb Announcement’, Washington,
DC, Consumer Project on Technology, 6 May.
32 Pharmaceutical Research and Manufacturers of America (1999), ‘Submission for the
“Special 301” Report on Intellectual Property Barriers’, Washington, DC,
16 February.
33 Bailey, H. (1999), ‘Bitter Pills: The Battle over Prescription Drug Prices’, Center for
Responsive Politics Money in Politics Alert, 5(17), 17 May.
Chapter 8 7/22/03 6:42 pm Page 176
34 Navarro, V. (1995), ‘The Politics of Health Care Reform in the United States,
1992–94: A Historical Review’, International Journal of Health Services, 25(2),
p. 198.
35 Love, J. (1999), ‘Washington DC as a Small Town’, e-mail communication to
IP-Health (ip-health@essential.org), Washington, DC, 13 April.
36 Werner, D. and Sanders, D. (1997), Questioning the Solution: The Politics of Primary
Health Care and Child Survival, Palo Alto, HealthWrights, pp. 92–4.
37 Judis, J. (1999), ‘K Street Gore’, The American Prospect, 45, July–August.
38 Ridgeway, J. (1999), ‘Gore AIDS Scandal Helps Drug Companies nix Cheap
Medicines’, The Village Voice, June 2; Caelers, D. (1999), ‘Gore told to Ease up on
Anti-South Africa Drugs War’, Africa News Service, 18 May.
39 Corn, D. (1999), ‘Gore to South Africans: Drop Dead’, New York Press, 2 June.
40 Richwine, ‘US Blocking Distribution of AIDS Drugs, Critics Say’.
41 Kelly, E. (1999), ‘Cost of Prescription Drugs Drives Consumers to Canada’, Gannett
News Service, 21 May.
42 Quaid, L. (1999), ‘Lawmakers push for Cheaper Prescriptions’, Associated Press,
28 May .
43 Wolfe, W. (1999), ‘FDA Head tells Seniors Agency can’t Help cut Drug Costs’,
Minneapolis Star Tribune, 3 June.
44 Sanders, B., Berry, M. and Emerson, J. A. (1999), ‘Dear Colleague Letter: Help
Americans enjoy the Same Low Prescription Drug Prices as Other Countries’,
Washington, DC, US House of Representatives, 25 May.
45 Médécins sans Frontières Health Action International and Consumer Project on
Technology, ‘AIDS and Essential Medicines and Compulsory Licensing’.
46 Williams, F. (1999), ‘Campaign over Drug Licensing to Grow’, Financial Times,
29 March.
47 Russell, S. (1999), ‘New Crusade to Lower AIDS Drug Costs’, San Francisco
Chronicle, 24 May.
48 Silverman, M., Lydecker, M. and Lee, P. (1992), Bad Medicine, Palo Alto, Stanford
University Press; Werner and Sanders, op. cit., p. 95.
49 Orr, J. (1997), ‘Rexall for Profits’, Dollars and Sense, 128, July–August, p. 21.
50 Assavanonda, A. (1998), ‘NGOs Rally Against Patent Law Changes: Call on US to
Stop Pressuring Thailand’, Bangkok Post, 8 September.
Chapter 9 /007 7/24/03 3:05 pm Page 177
CHAPTER NINE
1. Introduction
Contextualising the struggle for access to pharmaceutical treatment of
HIV/AIDS requires that we immediately confront the bizarre twists and
turns of South African policy in this regard. By illustration, consider the
argument of Thabo Mbeki’s key spokesperson on the issue (prior to his
death in late 2000). In March 2000, Parks Mankahlana off-guardedly justi-
fied to Science magazine why the SA Department of Health refused to
provide a relatively inexpensive (R100 million per year) anti-retroviral treat-
ment to pregnant, HIV-positive women: ‘That mother is going to die and
that HIV-negative child will be an orphan. That child must be brought up.
Who is going to bring the child up? It’s the state, the state. That’s resources,
you see.’1
Yet as was subsequently pointed out – and confirmed by the Department
of Health itself – the cost savings associated with treatment against mother-
to-child transmission of HIV could potentially be enormous (R700 million
per annum was one estimate).2
Thus at the Durban AIDS conference in July 2000, ANC parliament-
arian Winnie Madikizela-Mandela accused her government of being ‘an
obedient servant of multinational companies that continue to put their
profits above our people’. Acting SA Constitutional Court judge Edwin
Cameron observed, ‘The drug companies and African governments seem to
have become involved in a kind of collusive paralysis. International
agencies, national governments and especially those who have primary
power to remedy the iniquity – the international drug companies – have
failed us in the quest for accessible treatment.’3
This chapter makes the case that in spite of heroic efforts by radical civil
society groups to gain access to anti-retroviral drugs through their formi-
dable battle with multinational corporations and the White House,
Pretoria failed miserably to follow up on these efforts, and is effectively
losing the war against HIV/AIDS. To understand why it did so, at the
expense of Mbeki’s reputation, requires structural analysis of capitalism
and health.
Chapter 9 /007 7/24/03 3:05 pm Page 178
ACTing UP
In the US, Gore began to come under tough pressure, as ACT UP activists
increased the profile of the issue up to the level of national media coverage
through what the Baltimore Sun newspaper described as ‘raucous demon-
strations at campaign events’ in June 1999.4 Notwithstanding a meeting
between activist leaders and top Gore officials (White House AIDS czar,
Sandra Thurman, Al Gore’s national security spokesman, Tom Rosshirt,
and Tipper Gore’s chief of staff, Clark Ray), ACT UP pledged to dog the
presidential campaign with its banners: ‘No Medical Apartheid!’, ‘Gore’s
Greed Kills!’, ‘AIDS Drugs for Africa Now!’ Gore was confronted repeat-
edly and aggressively in New Hampshire, California and Pennsylvania at
the very outset of his campaign, which he eventually lost by a few hundred
(possibly miscounted) Florida votes in November 2000.
Reflecting the politicisation of the issue, columnist Arianna Huffington
turned against former fellow Republican corporate allies:
Allowing South Africa to license domestic production of the lifesaving
drugs, known as ‘compulsory licensing’, is one of those rare issues – such as
child abuse and drunk driving – on which there cannot possibly be two
sides. After all, the country is suffering from an AIDS epidemic that our own
surgeon general has compared ‘to the plague that decimated the population
of Europe in the 14th century’. The vice president’s office says it is trying ‘to
help AIDS patients by making sure drug companies maintain profit levels to
develop new AIDS medications.’ But what good are AIDS medications if
they can’t get to the people with AIDS? And someone should remind the
vice president that last year alone the three major AIDS-drug manufacturers
– Glaxo Wellcome, Bristol-Myers Squibb and Pfizer – made respectively
$4.43 billion, $3.64 billion and $3.35 billion.5
However, the Washington Post editorialised, ‘Vice president Gore stands
accused of defending pharmaceutical industry profits at the expense of
South African AIDS patients. Welcome to campaign season. The AIDS
activists who have heckled Mr. Gore at his early appearances, seeking to
Chapter 9 /007 7/24/03 3:05 pm Page 179
drown him out with chants of “Gore’s Greed Kills,” manipulate the facts in
what is actually a much more complicated and interesting debate.’6
But the facts, as even the State Department acknowledged, boiled down
to the US government’s application of extraordinary pressure to a new
African democracy so as to prevent it from engaging in parallel imports and
compulsory licensing permitted by the WTO, as well as from making its
case to the wider world through speeches to international organisations.
While the context of US imperialism and multinational corporate power in
an era of globalisation conditioned all aspects of the struggle, the most
important motivating factor for Al Gore appeared to be pharmaceutical
corporation campaign contributions.
Gore retreats
Perhaps, then, the activists could counter this immediate pressure point.
For on 25 June Gore wrote a letter to black members of Congress stating
that: ‘I want you to know from the start that I support South Africa’s efforts
to enhance health care for its people – including efforts to engage in
compulsory licensing and parallel importing of pharmaceuticals – so long as
they are done in a way consistent with international agreements.’7 This was
the beginning of a climbdown on the issue, which culminated in Bill
Clinton’s concession in December 1999, at the Seattle World Trade
Organisation meeting, that generic AIDS drug production or importation
would not face US opposition.
But it soon became clear that intensified activism against and embarrass-
ment of the pharmaceutical corporations and their Northern government
backers was not sufficient to open space for more proactive Third World
health and trade ministries to keep people alive. For those very Third
World leaders – such as Mbeki – were confronted by their own perception
of reality: the economic need not to treat HIV/AIDS.
Denialism
This line of argument is also promoted by conservative ‘AIDS dissidents’,
better termed ‘denialists’ – a small, marginalised bloc of researchers who
deny a link between HIV and AIDS, instead attributing the disease to envi-
ronmental factors. But no African public-health professional needs a
lecture from University of California denialists on the relationship between
poverty and health indicators. Mbeki dropped the denialist line from public
statements late in 2000 after the confusion he was causing became unten-
able. But he didn’t give up on it, and at a media dinner with World
Economic Forum elites in Davos in January 2001 he repeatedly referred to
the possible ‘biological difference between Africans and whites’ that
affected the way the virus developed.9
Are there other explanations for Mbeki’s shocking, tragic turn to
HIV/AIDS denialism? Three come immediately to mind. The first is the
presumption made by Al Gore that US pharmaceutical companies could
get away with mauling SA’s 1997 Medicines Act, reflecting the real power
relations in global political economy, which persist even after Gore’s humil-
iating retreats in 1999–2000. Secondly, ongoing neo-liberal pressure on
South Africa’s health and welfare budgets made it easier to deny than to
treat HIV/AIDS. And thirdly, some top policy-makers in Pretoria seem ulti-
mately indifferent to the health needs of masses of superfluous low-income
people, who will never have a role as labourers in the formal capitalist
sectors of the South African economy.
Pharma-corporate power
Hence after activists won the space for Pretoria to go through with compul-
sory licensing and parallel imports of cheap anti-retrovirals, Pretoria failed
to take advantage of it. Mbeki snatched defeat from the jaws of victory by
beginning his bizarre questioning of the link between the HIV virus and
AIDS. The broader war against AIDS took a quick turn for the worse. But
the fiasco unfolded not just because of Mbeki’s mercurial personality, and
won’t be resolved by a change of mind – or even by ex-President Nelson
Mandela’s closing exhortation to the Durban conference that preventing
mother-to-child transmission should be of highest priority. Necessary as
these personal interventions are, they are not sufficient.
The political-economic facts of AIDS point out the need for a yet more
profound struggle against the underlying assumptions and characteristics of
South African – and international – capitalism. Part of the problem remains
the awesome profits that private firms can achieve – and seem to feel they
have the right to achieve – through monopoly pricing power backed by
patent protection (see Table 4).
Zackie Achmat: Let’s deal with this forthrightly. Mbeki also said that TAC
had infiltrated the trade unions, and that we wanted to embarrass him
because of his statements from a year ago questioning the link between the
HIV virus and AIDS. In reality, Mbeki embarrassed himself.
As for the trade unions, they had just demanded, at their September
congress in front of Mbeki himself, that government reject this bizarre
theory of AIDS and government policy. Are we a front? We get no donations
from drug companies, and we were the first and loudest organisation to
tackle them. So after Mbeki’s outburst, we went to the South African
government Public Protector to demand that he retract the statement, but
that office hasn’t responded yet.
Meanwhile, the union leaders like Zwelinzima Vavi were furious about
this insult to their integrity. The South African Democratic Teachers Union,
for example, headlined their newspaper the next month in huge letters,
‘Sorry Mr President, we can’t infiltrate ourselves.’
MM: Mbeki soon backed down and said he wouldn’t make further state-
ments on AIDS.
ZA: Yes, but he had already done a tremendous disservice to the country,
particularly to the ANC. There is no doubt in my mind that a lot of people
didn’t vote ANC in the recent municipal election because of the AIDS issue.
The ANC vote went from 67% in the 1999 general election to 60% in
December. Thankfully, the trade unions pushed Mbeki into silence, saying
very explicitly, ‘You’re wrong on HIV and we want treatment!’
But the other point that most critics are making now is that while Mbeki
claimed that poverty was the key cause of AIDS deaths, in fact if you look at
the SA government’s position on poverty reduction, it is also a disaster. The
country’s worst-ever outbreak of cholera, which affected 12 000 people in
low-income rural areas with more than 50 fatalities during the last five
months of 2000, was catalysed by the inhuman cut-offs of clean water by
government bureaucrats because people couldn’t pay a R51 ($6.80) con-
nection fee.
TAC hopes that the ANC’s municipal election promise of free water and
free electricity is implemented, but we desperately need the leading advo-
cacy groups in South Africa, like Jubilee 2000 and Cease Fire, to work
closely with trade unions to redirect the budget to that end, and to increase
the health budget. We need a 33% increase to develop infrastructure, to
train, and to employ more staff, up from R24 billion ($3.2 billion) to
R32 billion ($4.3 billion). Recently, per-capita health spending has been
declining, which can only be considered politically irresponsible, in the
midst of the AIDS disaster.
MM: This would be aimed, mainly, at assuring all who are HIV+ ultimately
get treatment.
Chapter 9 /007 7/24/03 3:05 pm Page 185
ZA: Yes, but for us, a move away from the multinational corporate producers
to local generic production is the only way. We actually need not only state
production of drugs, but also private generic competition here in SA.
MM: What, realistically, can you expect government to do on treatment?
ZA: We would like to see, by mid-year, the implementation of what the
government said it would do last August on prevention/treatment of
opportunistic HIV-related diseases. For example, the tuberculosis budget is
just R500 million per year, which just scratches the surface of what’s needed.
We have a TB case rate in South Africa of more than 350 per 100 000 people,
which is the world’s worst. In the mining industry, it’s as high as 3 000 per
100 000. The main problem in the lowest-income provinces is that between
a quarter and three-quarters of rural clinics don’t have TB drugs. This is
partly because of limited managerial capacity in rural areas, combined with
budget cuts, especially to hospitals, which always drop consumables like
medicines first. So the TB budget needs a massive increase.
We are also demanding introduction of cotrimoxazole to prevent PCP-
pneumonia, which kills mainly HIV+ infants. A monthly supply would cost
R4 ($0.53) for children and R8–24 ($1.06–3.18) per adult, which is a great
savings over hospitalisation costs, which are up to R150 000 per patient
($20 000). But right now, there’s not sufficient political commitment from
the government to get access to drugs even for these extremely obvious areas
of treatment.
MM: What do you say to critics who claim that expanding treatment
through cheap parallel imports, as you advocate, risks introducing drugs of
questionable quality, is infeasible due to lack of health-system capacity to
administer drugs properly, and consequently will expand drug-resistant
strains of HIV?
ZA: First, on the quality of imports, we now have official clearance to import
Fluconazole, at 2.2% of the price charged by private-sector clinics, and
we’ve shown that the drug is high quality. Even the Medicine Control
Council, which charged me with illegal importation of medicine when I
brought in 10 000 Fluconazole capsules from Thailand last year just to make
the point, also concedes that the quality is fine.
By the way, TAC is still being investigated by the SA Revenue Services for
that civil disobedience, and they’ll probably charge me for tax evasion. They
won’t get more than R2 800 from Value Added Tax on the symbolic ship-
ment I brought in, so it’s clearly petty harassment by the ANC loyalist who
runs the tax system.
Second, we should not underestimate the difficulties of providing anti-
retrovirals, and we don’t. If it’s done on the basis of a clear, well-defined
plan, it shouldn’t be beyond our capacity in South Africa to establish an
effective system for administering treatment.
Third, we agree that if you have weak implementation, drug-resistant
Chapter 9 /007 7/24/03 3:05 pm Page 186
strains will emerge. Certainly, our health professionals need more training in
prescription techniques.
Still, 12% of new infections in the US are found to be based on drug-
resistant strains. Is anyone saying that the US must stop providing treat-
ment? Moreover, it is well known that rich countries have witnessed a
dramatic overprescription of antibiotics, leading to many kinds of drug-
resistant diseases. So this isn’t just a problem of HIV/AIDS treatment, and
we shouldn’t be the class of patients denied access as a result.
The problem of drug resistance can be addressed through other means as
well. Our private medical-aid insurance system puts an excessive limitation
on payment for therapy, which leads doctors to prescribe a dual-therapy
treatment instead of triple therapy, or even to prescribe AZT as mono-
therapy, which gives rise to much quicker drug-resistance. In addition, South
Africa is the most frequent site for clinical trials in the developing world, due
to good infrastructure. After treatment is halted when trials are finished,
there is a problem of drug resistance. But none of these problems should be
grounds for saying, no more treatment, especially since it is mainly low-
income black women who are the beneficiaries of treatment.
MM: Is the South African government moving towards establishing a clear,
well-defined plan?
ZA: Right now, the minister simply does not have a plan for anti-retrovirals.
But there are two other ministries who are also blocking progress. The
finance ministry does not provide enough money, and the ministry of trade
and industry has not taken a clear position on local production. This is
important, because the minister, Alec Erwin, is scared to offend the WTO
and the investment community by allowing local generic production. He
knows that this will send negative signals to other corporate investors.
But what these South African ministers are dead wrong about is that every
other well-informed business leader in the world now realises that unless
there is generic production, then too many people will die, and overall
health-system costs will be much higher than the cost of alienating the phar-
maceutical firms by violating their patents.
MM: It looked like you won the first major battle in the war with pharma-
ceutical companies in September 1999, when then-vice president Al Gore
agreed to back off the pressure he put on Mbeki and Erwin to withdraw a
South African law which made it possible to import drugs and license gener-
ics for local production. Then came Mbeki’s turnaround. What did you learn
from that struggle?
ZA: As I said, the bigger problem is the government’s unfounded fear of
alienating investors in general. But on the positive side, we had the most
exciting experience in rallying international solidarity since the anti-
apartheid struggle. The most helpful research organisation was the
Consumer Project on Technology. The most important voice to help gener-
Chapter 9 /007 7/24/03 3:05 pm Page 187
sans Frontiers and Oxfam—that Mbeki could easily have changed direction
to widespread applause. He didn’t, and his lawyers were instructed to plead
in court that the implications of the Medicines Act would not extend to
producing generic drugs in South Africa, but only to importing drugs from
Big Pharma where they were sold cheaper abroad. Dropping its momentary
alliance with Mbeki, TAC was compelled to file case in the Constitutional
Court in mid-2001, alleging that the government’s ongoing failure to autho-
rise anti-retroviral distribution was killing Mbeki’s most loyal constituents.
Trapped like bucks in the spotlights of a speeding vehicle, Mbeki and his
colleagues stumbled ever more quickly towards the oncoming collision,
making themselves ever more vulnerable both in medical terms and in the
court of public opinion. But in doing so, the government repeatedly mistook
the economic threats associated with the AIDS wreck—Big Pharma’s
monopoly pricing power and patent protection, Trevor Manuel’s extremist
fiscal austerity, and pressure against adding to the ranks of the unemployed,
orphaned and welfare-dependent (by allowing more people to live)—as
aspects of globalisation that had to be nurtured. The fealty to neoliberalism
which Manuel had earlier termed `impotence’ would soon haunt South
Africa, as the president began to be termed Chief Undertaker Mbeki.
Recall the ANC discussion document cited at the end of Chapter 7, which
concluded by repudiating potential government actions that are “in discord
with the rest of the world, but which can be sustained by virtue of a volun-
tarist South African experiment of a special type, a world of anti-Apartheid
campaigners, who, out of loyalty to us, would support and sustain such
voluntarism.” In reality, the world of anti-Apartheid campaigners grew and
grew. Just over a year after the discussion document’s circulation, the
Medicines Act had become the experiment that millions of desperate people
were awaiting, poised on the line dividing life and death. And within three
years, the ANC document’s last lines had become so profoundly fallacious
that tens of thousands were dying unnecessarily, because of Pretoria’s stub-
born refusal to break the chains of global pharma-apartheid. Still, radical
groups in civil society soldiered on, and the TAC’s alliances—with trade
unions locally, and many other activists internationally—offered hope for
saving lives at home, and, abroad, for sustaining a full-fledged attack on the
international financial pillars of global apartheid. As we review in the final
Part of this book, debates over fixing or nixing the major institutions at the
nerve centre of finance would first be necessary—while incorporating the
aspirations and sensibilities of African and Third World activism—followed
by the elaboration of a concrete alternative: an experiment `of a special type’
in locking capital down, driven by coalitions of grassroots activists who
would take their inspiration from the fight for life, against the fatal combi-
nation of AIDS and economic power.
Chapter 9 /007 7/24/03 3:05 pm Page 190
would take their inspiration from the fight for life, against the fatal combi-
nation of AIDS and economic power.
Notes
1 Cited in The Citizen, 14 July 2000 and the Mail and Guardian, 21 July 2000.
Mankahlana – who a week earlier said he would toss the Durban Declaration on
AIDS signed by 5 000 people into Mbeki’s ‘dustbin’ because it strongly refuted the
AIDS-dissident camp – immediately denied making the statement: ‘Their story is
a complete fabrication.’ Science’s editor replied that his reporter had recorded
Mankahlana in his Pretoria office on 24 March, and offered to play the tape. I
include this tragic incident because, notwithstanding Mankahlana’s subsequent
denial that the statement reflected policy, there was a general sense amongst
health professionals in South Africa that the Science quote was indeed official
thinking. (Mankahlana had personal experience that is perhaps worth citing for
further context. He was, at the time of making these quotes, the target of two
paternity suits based on failure to pay child maintenance.)
2 Both the Madikizela-Mandela and Cameron quotes are from the Mail and
Guardian, 21 July 2000.
3 Both quotes in the Mail and Guardian, 14 July 2000.
4 Weisman, J. (1999), ‘Activists doubt Gore tries to Reduce Cost of AIDS Drugs:
ACT-UP, Candidate’s Staff Talk on Medicine in Africa’, Baltimore Sun, 23 June.
5 Huffington, A. (1999), ‘Pharmacologic Al’,
http://www.ariannaonline.com/columns/files/062899.html, 28 June.
6 Washington Post, 24 June 1999.
7 Gore, A. (1999), ‘Letter to James E. Clyburn, Black Congressional Caucus’, 25
June, partially published in the Multinational Monitor, January 2001.
8 Mbeki, T. (2000), ‘Welcome Address’, opening speech to the 13th Annual
International AIDS Convention, Durban, 9 July.
9 As reported to the author by a journalist at the dinner.
10 George, S. (1999), The Lugano Report, London, Pluto Press.
11 I was the reporter, and cited the comment in Bond, P. (1991), Commanding
Heights and Community Control: New Economics for a New South Africa,
Johannesburg, Ravan Press.
12 Mail and Guardian, 21 July 2000.
13 Sources: Thai GPO and Biolab; India CIPLA; South Africa Department of Health;
Private Discount Pharmacy. Prices valid as of 16 October 2000. (Drugs and
dosages are used to compare prices rather than to indicate proposed treatment
regimens.)
14 The following are the holders of the patents on the above drugs, responsible for
the extremely high prices paid by South Africans: Bristol-Myers-Squibb (ddI –
didanosine); Bristol-Myers-Squibb (d4T – stavudine); Glaxo-Wellcome (AZT –
zidovudine); Glaxo-Wellcome (3TC – lamivudine); Glaxo-Wellcome (AZT/3TC);
Pfizer (Fluconazole); Boehringer Ingelheim (Nevirapine).
15 Lower-cost AZT is the result of activism. The AZT price was reduced from R5.54
in the public sector following TAC demonstrations and protests. The same applies
to the lower cost of Nevirapine for mother-to-child transmission.
16 Edited version published in Multinational Monitor, January–February 2001.
Part 4 7/22/03 6:45 pm Page 191
PA R T FOUR
Globalisation?
Or internationalism plus the
nation state?
‘Defund the Bank, Break the Bank, and Dump the Debt’ – activists in
Prague, September 2000.
Part 4 7/22/03 6:45 pm Page 192
CHAPTER TEN
1. Introduction
We have established, so far, that global apartheid is no accident, but is a
logical outcome of the operations of international capitalism at the turn of
the 21st century. We have correlated the rise of financial and commercial
dynamism and power to the underlying economic slowdown during the last
quarter of the 20th century. We have seen how that power intimidated the
nationalist leadership of even a newly liberated society like South Africa.
We have considered the ideology that supports and reflects financial and
commercial power, namely neo-liberalism. We observed how neo-liberalism
– particularly the freeing of barriers to financial, trade and investment flows
– serves the interests of multinational corporations and banks, and explic-
itly threatens the lives of those whose need for even essential goods and
services is frustrated by financial turbulence, property rights and other
manifestations of irrational market power. And we have located the ‘brain’
and ‘nerve centre’ of neo-liberalism in two Washington-based institutions –
the International Monetary Fund and World Bank – as well as in the
Geneva-based World Trade Organisation. This chapter considers the
strategic implications of these findings, from the standpoint of the progres-
sive ‘global justice movements’ described in Chapter five.
The two once-impenetrable international public-financial institutions
came into focus for a critical mass of activists at the turn of the century, in
a way that in turn sharpened what were previously quite fuzzy discussions
surrounding globalisation and popular resistance. The point of departure
for that focus was mid-April 2000, when an estimated 30 000 protesters
joined the ‘Mobilization for Global Justice’ in Washington, capping a week
that began ominously with a poorly attended Jubilee 2000 USA debt-relief
rally on 9 April (controversially addressed by neo-liberal Clinton econo-
mist Gene Sperling). In the middle of all this was a ‘No Blank Check for
China’ demonstration of 15 000 workers – from the right wing of the
American Federation of Labour-Congress of Industrial Organizations
(AFL-CIO) – at the Capitol building on 12 April, which raised the spectre
of a new ‘yellow peril’ campaign. The international economic debate in the
Chapter 10 7/22/03 6:30 pm Page 194
just to learn or teach – worked together marvelously. Diverse tactics did not
trump one another. Tension was minimal. Intercommunication was con-
siderable. Coalitions were strengthened rather than dissolving into tactical
disputes. There was in-the-street mutual aid, careful planning of venues and
events, and pre-demonstration communication of aims.3
Results included abundant forms of civil disobedience and 1 300 arrests
(although the first 600 were unwilling, as police used dramatic force during
an 15 April Free Mumia protest march and also closed the activists’
Convergence Centre on absurd fire-code charges). Encouragingly, unlike
Seattle, the 1 000-strong Revolutionary Anti-Capitalist Bloc of black-clad
anarchists worked in harmony with those carrying out civil disobedience,
and had the honour of attracting a police helicopter devoted solely to trail-
ing their movements across Washington on 16 April.
But most importantly for my purposes in this chapter, the Mobilization
drew the eco-socio-economic concerns of the Global South far deeper into
the fabric of the US movement than ever before. Granted, the protest failed
to obstruct the IMF/World Bank meetings (the Washington police spread
protest-boundary perimeters widely, paralysing over 90 city blocks in the
centre of town, but also gaining the physical space required to sneak several
hundred delegates into the meeting at 5 a.m. on the two mornings, while
groups of 100–500 protesters subsequently clogged 18 intersections and
turned away numerous late-rising delegates). No matter, the combination of
thorough preparation and the large size of the turnout in Washington:
helped raise public consciousness about the IMF and World Bank to
unprecedented levels;
brought sympathetic activists from different constituencies into success-
ful coalition;
taught organisers a great deal about Washington logistics (and how they
can be gummed up next time);
showed South allies the extent of solidarity possibilities, encouraging them
to intensify their own local critiques of the IMF/World Bank; and also
facilitated a long-overdue split amongst development NGOs (a group of
22 conservative organisations sent a bizarre, self-discrediting endorse-
ment note to the IMF and World Bank).
The Washington protests set an excellent stage for several years of intense
grassroots campaigning aimed at closing down the Bretton Woods twins,
thus fundamentally reorienting our understanding of development finance,
and in the process realigning power relations in ways that could benefit
democratic political movements across the South. This chapter makes the
case that just such an aim should be amongst the highest priorities of those
(especially Northerners) who are supportive of global justice.
Chapter 10 7/22/03 6:30 pm Page 196
thousands of people would converge with the aim of disrupting the IMF,
World Bank and WTO gatherings of elite rulers and corporate chiefs as a
movement, would have been dismissed as a leftist fantasy during the late
1990s, but after Seattle, anything seemed possible.
April in Washington
Consider the circumstances of April 2000 at the IMF/World Bank head-
quarters in Washington, at the obscure spring meeting attended by only a
few hundred officials. Although in Berlin (1988) and Madrid (1994),
previous IMF/World Bank annual meetings attracted tens of thousands of
demonstrators, the mass of the US population had never cared much about
the Bretton Woods institutions. Likewise, US leftists long suffered an
inward-looking history, broken only occasionally by solidarity struggles
against Spanish fascism, the Vietnam War, apartheid and Central American
terror. Conditions for activism against global-scale institutions were notori-
ously lacking in Washington during the Cold War, until trade unions, envi-
ronmentalists and the Ralph Nader organisation Public Citizen put the
Seattle WTO meeting on the protest map on 30 November 1999.
A closer examination of Washington’s opponents is in order.5 The ‘N30’
and ‘A16’ protests (so-called because of the dates of their occurrences)
broadened and deepened the existing left-wing but technicist critiques of
the WTO, IMF and Bank. The WTO attracted domestic dissent partly on
the basis of its explicit threat to US environmental and labour standards.
Mass consciousness against globalisation was already increasing dramati-
cally, in the wake of specific campaigns against, amongst others, oil compa-
nies, textile/clothing sweatshops, fast-food outlets, shoe firms, chemical
and biotech companies, advertising agencies and even coffeehouse chains.6
Key events that brought large numbers together in coalition included the
North American Free Trade Agreement debate in 1993, the Vancouver
protest against the Asia Pacific Economic Cooperation meetings in 1997,
successful attacks on Clinton’s proposed Fast-Track Trade Negotiating
Authority in 1997 and on the OECD’s Multilateral Agreement on
Investment in 1998.
Yet these precursors were relatively sporadic and disconnected from the
base. And as was often remarked, the ideological diversity of the protesters
still proved a major stumbling block. However, while there was no obvious
grounds for protest co-ordination, and while the particular demonstrations
are mainly defensive – ‘against’ some or other attack upon basic socio-
economic and democratic rights – the exuberance must, eventually, cohere
in programmatic terms. At some point soon, the movement could throw up
not only that which it is ‘for’ – as have the Zapatistas, who served as a cata-
lyst for rebellious spirit, with their Intergalactic Encounters For Humanity,
Against Neoliberalism – but also a rough outline of the strategy and
Chapter 10 7/22/03 6:30 pm Page 198
below.7 A hopeful sign is the movement away from NGO jaw-jaw sessions
over potential reforms of the IMF and World Bank to radical activism.
The police won elite praise for ‘saving Washington’ (see above).
However, the cops’ amateurishly repressive streak was disclosed by the
clumsy way they shut the protesters’ Convergence Centre on the morning
of 15 April and the brutal means by which they rounded up an initial
600 protesters (plus bystanders) – not to mention 50 giant papier-mâché
puppets – at a Mumia Abu-Jamal support rally that afternoon.
Likewise, actions against the IMF and World Bank annual meeting in
Prague on 26 September 2000 had similar dynamics. Thousands of protest-
ers were denied entry to the Czech Republic, yet 15 000 did manage to
gather in protest streams leading up to a key bridge in the vicinity of the
meetings. Small groups of militant anarchists – joined by documented
provocateurs from the Prague police – tossed rocks and even molotov cock-
tails from sites very close to the hall. The bankers’ meeting had to be closed
a day early, as a direct result of the mayhem.10
As a result, logistical struggles against the Washington centres of inter-
national financial power will transpire again, with even more intense
confrontations likely. It may even be possible at the IMF/World Bank
annual meeting in September 2001 for tens of thousands of activists to
cause sufficient chaos to prevent business-as-usual by the 5 000 delegates.
Wolfensohn has already begun to publicly ask whether it is possible – and
safe – to hold these meetings in future, given the persistence of the demon-
strators.
Co-opted NGOs
Perhaps most notable as a symbol of what is wrong with the mentality that
wants to work within the system, an ‘Interaction 22’ grouping of US-based
NGOs, all funded by the neo-liberal US Agency for International
Development, wrote a letter to World Bank president James Wolfensohn on
14 April 2000, two days before the main protest at the spring meetings.
They expressed ‘deep concern at the impression created by some of our
NGO colleagues in the streets this week that the World Bank and the IMF
are at serious loggerheads with the entire not-for-profit community … We
have a very different perspective on recent positive directions taken by the
Bank’.11
Inside the World Bank, chief NGO liaison official John Clark – formerly
a leading World Bank critic based at Oxfam UK – issued an e-mail memo
to colleagues a few days later, ridiculing the Interaction 22 for being ‘much
less skeptical about these reforms than most of us inside the Bank!’.
However, pursuing triage, he also identified what he termed a ‘dilemma’ for
a middle-ground group of NGOs, namely, ‘how to respond to the demo
organisers’ request to all NGOs to boycott all meetings with the Bank and
Fund … For some the compromise was to take part in meetings with Bank
staff off the premises (some said this was because they didn’t want to be
seen and identified by demonstrators and be accused of co-option); but
others – notably Jubilee 2000 [US] – were quite open that they intended to
ignore the request.’12
Such divisions and even ruptures are probably inevitable, not only
amongst petit-bourgeois NGO cadres, but across the political spectrum, as
the world economy continues on its volatile, apparently self-destructive
course. The global establishment also writhes with conflict, including
squabbles in 1999–2000 over US vetoes of proposed new WTO and IMF
Chapter 10 7/22/03 6:30 pm Page 202
Labour lurches
By early 2000, two controversial Clinton-administration trade deals (the
US-China agreement and the Africa Growth and Opportunity Act) faced
stiff opposition from domestic constituencies, and the corporatist Advisory
Committee for Trade Policy and Negotiations broke apart thanks to a walk-
out by justifiably frustrated AFL-CIO leaders. At about the same time,
Business Week reported that nine out of ten US residents polled labelled
themselves either ‘fair traders’ or ‘protectionist’, with just one in ten identi-
fying her/himself as a ‘free trader’. Clinton’s trade policy was generally
understood, according to the main survey on the topic, to serve the interests
of multinational corporations ‘too much’ (according to 54% of respon-
dents) and working Americans ‘too little’ (according to 72%).13
In this unusual US context, the movement against globalisation was radi-
calised. The logistics of the Seattle protest had distinguished stodgy, suited
leaders from front-line labour, social and environmental movement
activists. Whether the WTO should be a site of ‘reform’ – usually through
introducing social, labour and environmental conditions, known as ‘Social
Clauses’, to trade agreements – came under fierce debate. For although
Chapter 10 7/22/03 6:30 pm Page 203
some Southern trade unions backed the Social Clause strategy through their
(often subordinate) role in the International Confederation of Free Trade
Unions, many influential Southern social-movement leftists condemned it
for leaving in place the existing anti-democratic structure of the inter-
national trading system. To improve the WTO, they argued, simply ampli-
fies imperialist power relations.14 The point, instead, should be to attack the
power that the WTO has to overrule and undermine international agree-
ments and national laws that protect human rights and the environment
(e.g. a selective-procurement law in Massachusetts, directed against Burma
and ruled illegal by the WTO), and to find effective means to defend these
rights.
Because his administration’s efforts to politically rehabilitate the ‘free
trade’ agenda were to some extent blocked by organised labour and envi-
ronmentalists, Bill Clinton announced apparent support for the Social
Clause in the wake of the Seattle protests (his officials immediately
announced that he ‘misspoke’ on the issue, however). Some groups, includ-
ing conservative leadership factions within Northern trade unions, would
no doubt have been happy to settle for lip service to an unenforceable
Social Clause in exchange for allowing a new WTO Millennium Round to
go forward. But these forces were successfully marginalised, and found
themselves neither strong enough to sell the strategy to the broader move-
ment nor to inject Social Clauses into the Clinton administration’s Africa
and China trade pacts.
But a serious danger of backsliding emerged in the wake of Seattle,
namely the xenophobia encapsulated in the slogan of the Naderite organ-
iser Mike Dolan: ‘China, we’re coming atcha!’ If trying to keep China out
of the WTO in early 2000 was the ‘proxy for all our concerns about
globalisation’, as the AFL-CIO’s Denise Mitchell had it, then the global
labour movement would suffer. US-based journalist and social critic
Alexander Cockburn rightly concluded that the responsibility of labour
and social movements lay elsewhere:
There’s no win-win situation for workers of the world, in the current era at
least. American steelworkers here do better, ergo Russian and South Korean
steelworkers overseas do worse. A garment worker here loses a job, a Central
American makes a dime. Capitalism dictates the choices. So what can we do
here? I don’t think we should be trying to fix up the WTO or keep China
out. That’s not the sort of currency radicals should have truck with. Our
currency is solidarity.15
As I will discuss in more detail in Chapter eleven, the Congress of South
African Trade Unions followed a slippery logic and strategy with Southern
African trade unions similar to that of the AFL-CIO, generating conflict in
the process.16 (For US labour, there is a preferable strategy to tinkering
Chapter 10 7/22/03 6:30 pm Page 204
with trade deals and the WTO, i.e. one of either attacking particular
corporations (consistent with solidarity campaigning principles), or
passing restraining legislation against transnational corporations, similar in
scope to the 1977 US Foreign Corrupt Practices Act, which penalises
specific firms – not the countries they victimise – for explicitly anti-social
behaviour.)17
Debt debate
Similarly, the international movement against Third World debt was
divided through the late 1990s between, on the one hand, reformers in
Jubilee 2000’s US, British, German and Japanese networks, who largely
accepted the framework imposed by the IMF, World Bank and G-8
countries, and on the other, radicals in Jubilee South and allied Northern
groups (especially Jubilee Canada), who attempted to break open that
framework. The latter camp included critics who viewed campaigns against
debt as inextricably linked to fighting structural adjustment in general – at
national policy level or in very direct forms such as the privatisation of
municipal utilities – and the power of the IMF and World Bank in parti-
cular. Fortunately, in early 2001, Jubilee US began moving to this position.
As I will discuss in the next chapter, leading African Jubilee proponents
tended to be more structuralist and also more militant, especially chapters
in South Africa, Zimbabwe, Nigeria and Malawi. When the Jubilee 2000
South Summit convened in Johannesburg in November 1999 and Dakar,
Senegal in December 2000, the best social movement leaders and activists
from Africa met partners from around the Third World, and resolved to
pressure their respective national leaders to collectively repudiate the
debt.18 The Jubilee Summit also called for the closure of the IMF and
World Bank.
In contrast, some Jubilee chapters in the North were directed by NGO
and mainstream-church staff who preferred keeping economic policies out
of the discussion, and who consciously acceded to the frames of reference
of the IMF, World Bank and G-8 finance ministers. They persistently
compromised on partial debt-forgiveness/relief – the ‘unrepayable’ debt of
the poorest countries – not cancellation or reparations. They conceded that
even meagre portions of relief (e.g. in Mozambique, as discussed in Chapter
three) must be linked to structural-adjustment policies that left the IMF
and World Bank in control of Southern economies, and barely blinked at
the IMF’s renaming of these policies as ‘poverty reduction’. Worst of all,
they embraced the false claim that the IMF and the World Bank needed
more funding from taxpayers in the G-8 countries in order to compensate
for the fraudulent, highly conditional debt relief. And if this strategy was a
disaster, so too was the conservative Jubilee faction’s sense of tactics, as they
insisted on no threat of any kind, particularly on the funding front.
Chapter 10 7/22/03 6:30 pm Page 205
But even though Stiglitz offered very little substantive policy change in
his ‘information-theoretic’ critique of market imperfections, and even
though his Post-Washington Consensus did not break from most neo-
liberal shibboleths,22 he was roundly despised by IMF and US Treasury
staff. Within 30 months, after robust debates over IMF competence, he was
pushed overboard. Stiglitz diplomatically claimed to have jumped ship, in
order to have more freedom to launch his critiques – such as a scathing
attack in New Republic in April in which he slated ‘third-rank economists
from first-rate universities’.23 But according to a reliable World Bank insider
quoted in the February 2000 issue of Left Business Observer, US treasury
secretary Summers ‘made it clear that if Wolfensohn wanted a second term
as World Bank president – to start on 1 June 2000 – Stiglitz had to go’.
In sum, IMF/World Bank reforms haven’t worked, and serious reform-
ers have been pushed out or have quit in disgust. The latest gambit, the
announcement in October 1999 of the ‘Poverty Reduction Strategy Paper’
(PRSP) as central to future IMF/World Bank activity in any developing
country, was revealed as a scam in May 2000, in the institution’s own main
pilot case, Bolivia. According to an NGO reportback, ‘The IMF resident
representative in Bolivia remarked that although the PRSP would take civil
society’s recommendations into account, the macroeconomic targets
previously agreed to by the Bolivian government were by no means open to
negotiation … The presenters of this macroeconomic model did not
adequately respond to questions from the audience on how their approach
differs at all from the past.’24
A month earlier, at the height of the Bolivian water privatisation crisis
(generated by explicit World Bank advice which sent water prices soaring
to more than a quarter of a typical household’s wage packet), Wolfensohn
himself unveiled his own lack of comprehension: ‘The biggest problem with
water is the wastage of water through lack of charging,’ he pronounced on
12 April at a press conference, when asked about the World Bank’s role in
the Cochabamba crisis. ‘In the riots that you had in Bolivia – which, I’m
happy to say, are now quieting down – it was about a new dam, a new
power, in (sic) which the Bank on this occasion had nothing to do.’25 His
entire answer was fallacious, and the leader of the Cochabamba protests,
trade unionist Oscar Olivera, took the opportunity in October 2000, in the
wake of a new round of protest, to join several South Africans in a North
American tour to support the World Bank Bonds Boycott initiative.
At precisely the same time, as I will discuss in the next chapter,
Wolfensohn’s Africa department was insisting on full-cost-recovery
strategies for even basic water supplies. The one reform that appeared
appropriate at this point was an October 2000 Congressional prohibition
on the World Bank invoking user fees on Third World education and health
services, which was mainly an ideological victory over neo-liberalism.
Chapter 10 7/22/03 6:30 pm Page 207
gone, not to poor countries with poor credit ratings and investment ratings,
but to countries that could have raised the money in international private
capital markets owing to their having investment grade or high yield ratings.
In terms of achieving a positive development impact, the Bank’s own
evaluation of its projects shows an outstanding 55–60 per cent failure rate.
The failure rate is particularly high in the poorest countries, where it ranges
from 65 per cent to 70 per cent. And these are the very countries that are
supposed to be the main targets of the Bank’s anti-poverty approach …
Rather than expect the highly paid World Bank technocrats who live in
the affluent suburbs of Northern Virginia to do the impossible – designing
anti-poverty programs for folks from another planet: poor people in the
Sahel – it would be more effective to abolish an institution that has made a
big business out of ‘ending poverty,’ and completely devolve the work to
local, national and regional institutions better equipped to attack the causes
of poverty.30
Washington), the basic rationales for the World Bank fall away. And instead
of relying upon the IMF to maintain a positive balance of payments when
fickle international financial inflows dry up or run away frightened, Third
World countries that in the future climb out from under the heel of the IMF
and World Bank could realistically impose Malaysian-style exchange
controls and tax unnecessary imports. (They would also have more freedom
to default on illegitimate debt.)
In short, the South ultimately shouldn’t need a dollar-denominated IMF
and World Bank for development. Indeed it is probable that only when
Washington’s institutional power fades that local-, national- and perhaps
regional-development finance officials can reacquire the ability they once
enjoyed, a few decades ago, to tame their own financial markets. (Such
‘financial repression’ entailed state interest-rate subsidies, directed credit,
prescribed asset requirements on institutional investors, community re-
investment mandates and other means of socialising financial capital.)
The one remaining point to make is the easiest, most practical concern:
is defunding actually feasible? The same question was asked of advocates of
anti-apartheid financial sanctions, and answered in the affirmative in 1985,
just a few years after campaigning became serious. In addition to defunding
the IMF through popular pressure on Congress – and indeed all parlia-
ments – to deny further resources, activists returning from A16 began
taking advantage of the World Bank’s extreme reliance upon international
bond markets. Nearly 80% of its funds for onlending come from bonds,
making this the most compelling pressure point and local handle for the
medium-term struggle. Hence, the World Bank Bonds Boycott was initiated
by Haitian, South African, Brazilian and many other activists and debt
campaigners across the world in late 1999, and launched in April 2000.33
Berkeley City Council offered the initial commitment that its municipal
fund managers won’t buy World Bank bonds (they were also the first
municipality to record anti-apartheid divestment). All investors of
conscience – pension funds, churches, university endowments, individuals
– are being asked not to profit from poverty and ecological destruction
through increasing the World Bank bond holdings of their portfolios. In
particular, the Rainforest Action Network combined with the World Bank
Bonds Boycott campaign to target Citibank for its marketing of World
Bank Bonds. A frightened Washington Post lead editorial called the World
Bank Bonds Boycott ‘crazy’.34 In coming months and years, activists will
prove establishment concerns entirely justified, as they did using the finan-
cial sanctions that demonstrably helped sink the Botha and De Klerk
regimes in Pretoria.
For progressive internationalists, breaking the Bank and defunding the
Fund can dramatically improve global and local power balances, open up
radical development-finance alternatives, and contribute to a solidarity
Chapter 10 7/22/03 6:30 pm Page 213
Notes
1 St Clair, J. (1999), ‘Seattle Diary: It’s a Gas, Gas, Gas’, New Left Review; see also
Charlton, J. (2000), ‘Talking Seattle’, International Socialism, 86.
2 Core groups included 50 Years is Enough, Alliance for Global Justice, Jobs with
Justice, Essential Information, Center for Economic and Policy Research, Center for
Economic Justice and several others. From their bases outside Washington, Global
Exchange continued its leading ideological role, Ruckus Society did excellent train-
ing, the Rainforest Action Network helped with direct action, and the International
Forum on Globalization sponsored a well-attended teach-in.
3 Albert, M. (2000), ‘Assessing A16’, Z Magazine, 19 April.
4 The most eloquent critique of these tendencies is to be found in Hart-Landsberg, M.
and Burkett, P. (2000), Development, Crisis and Class Struggle: Learning from Japan
and East Asia, New York, St. Martin’s Press.
5 The main published account to date, focusing on West Coast movement infrastruc-
ture, is by Dan LaBotz in Against the Current, September 2000.
6 The lead up to the current moment of anti-corporate protest is brilliantly analysed
by Klein, N. (2000), No Logo, London, Flamingo.
7 A recent discussion of the necessary tension between party and mass grassroots
organisation is Kagarlitsky, B. (2000), The Return of Radicalism: Reshaping the Left
Institutions, London, Pluto Press.
8 Economist, 11–17 December 1999.
9 http://www.aidc.org.za and http://www.jubileesouth.net/.
10 Kagarlitsky, B. (2000), ‘Prague: The People’s Battle’, unpublished manuscript,
October.
11 Among the 22 thriving charities and agencies were the National Peace Corps
Association, Overseas Development Council, Pathfinder International, Refugees
International, Save the Children and World Vision.
12 Clark, J. (2000), ‘Not all NGOs hate the Bank: memo to Katherine Marshall,’ World
Bank e-mail, 18 April.
13 Business Week, 24 April 2000; Program on International Policy Attitudes (2000),
Americans on Globalization: A Study of US Public Attitudes, College Park, Maryland,
p. 13.
14 One leading South advocacy group, Third World Network of Penang, Malaysia,
offered powerful opposition to Social Clauses from the outset, and their Africa affil-
iate, Isodec, Ghana’s premier NGO, co-ordinated an Africa Trade Network which
included the main left-wing organisations across the continent. See, for example,
Danaher, K. and Burbach, R. (eds) (2000), Globalize This!: The Battle Against the
World Trade Organization and Corporate Rule, Monroe, Common Courage Press,
especially the chapter by Walden Bello, ‘Why Reforming the WTO is the Wrong
Agenda’.
15 The quotations from Mitchell and Cockburn both appear in The Nation, 3 January
2000. Cockburn continued, ‘We should be making war on the IMF and World Bank,
helping poor countries fight to develop internal markets, hence better-paid workers
Chapter 10 7/22/03 6:30 pm Page 214
and stronger agriculture. We have plenty to denounce right here. The Jubilee 2000
campaign against World Bank bonds is a great thing.’
16 Bond, P. (2000), ‘Workers of the World, Transcend the Wedge!’, Z-Net
Commentary, 24 February; for more on the Social Clause debate, see
http://www.aidc.org.za.
17 See, for example, the writings of William Greider in The Nation.
18 It was Rosemary Nyerere Mwamakula who made this statement to the press in
Johannesburg, in honour of her late father’s unheeded call in 1983 for a debtor’s
cartel.
19 The Economist, 7 February 1992.
20 Daly, H. (1996), Beyond Growth, Boston, Beacon Press.
21 Wade, R. (2000), The Gift of Capital, London, Verso.
22 Stiglitz, J. (1998), ‘More Instruments and Broader Goals: Moving Toward a Post-
Washington Consensus’, WIDER Annual Lecture, Helsinki, 7 January. The limits
are addressed in Fine, B. (1998), ‘Industrial Policy Revisited’, Indicator SA, 15(4).
23 Stiglitz, J. (2000), ‘What I Learned at the World Economic Crisis’, New Republic,
17 April.
24 Selvaggio, K. and Deng, D. (2000), ‘Impressions of WB/IMF PRSP Training’,
e-mail, Catholic Relief Services, 11 May.
25 Transcript of 12 April 2000 press conference held by James Wolfensohn,
Washington, DC.
26 http://www.intellectualcapital.com/issues/issue364/item9048.asp.
27 Wagar, W. (1992), A Short History of the Future, Chicago, University of Chicago
Press. See reactions in Journal of World Systems Research, 2, 1996 (including Bond,
P. and Mayekiso, M., ‘Towards the Integration of Urban Social Movements at the
World Scale’).
28 Boswell, T. and Chase-Dunn, C. (2000), The Spiral of Capitalism and Socialism,
Boulder, Lynn Reiner. Both the quotations that follow are taken from the
Conclusion.
29 Young, I. M. (2000), Inclusion and Democracy, Oxford, Oxford University Press,
pp. 272–4. Young grounds the UN argument in the work of Erskine Childers, Brian
Urquhart and Chadwick Alger, and in David Held’s theory of cosmopolitan democ-
racy.
30 Bello, W. (2000), ‘Meltzer Report on Bretton Woods Twins Builds Case for
Abolition but Hesitates’, Focus on Trade, 48, April.
31 African National Congress (1994), Reconstruction and Development Programme,
Johannesburg, Umanyano Publications, sec. 6.5.16. See the discussion in Chapter
three, above.
32 Harvey, D. (1998), ‘The Geography of Class Power’, in L. Panitch and C. Leys, The
Communist Manifesto Now: Socialist Register 1998, New York, Monthly Review
Press, p. 72. Similar points have been made to me in very useful personal corre-
spondence with Ellen Wood, Susan George and Jeremy Brecher, amongst others.
Wood may be correct that ‘the opposite of fix-it may be something else – not nix-it,
but getting behind various kinds of local and national anti-capitalist and anti-impe-
rialist struggles, which isn’t quite the same thing’.
33 http://www.worldbankboycott.org/.
34 Washington Post, 11 April 2000.